Robust Pricing and Hedging around the Globe by Sebastian Herrmann (U Michigan)

Event Date: 

Thursday, January 11, 2018 - 3:30pm to 4:30pm

Event Location: 

  • Sobel Seminar Room

Robust Pricing and Hedging around the Globe

We study the martingale optimal transport duality for càdlàg processes with given initial and terminal laws. Strong duality and existence of dual optimizers (robust semi-static superhedging strategies) are proved for a class of payoffs that includes American, Asian, Bermudan, and European options with intermediate maturity. We exhibit an optimal superhedging strategy for which the static part solves an auxiliary problem and the dynamic part is given explicitly in terms of the static part. In the case of finitely supported marginal laws, solving for the static part reduces to a semi-infinite linear program.

This talk is based on joint work with Florian Stebegg (Columbia University).