Pathwise super-replication via Vovk's outer measure
classification
💱 q-fin.MF
math.PRq-fin.PR
keywords
financeoptionsapproachderivativeshobsonlookbackmodel-independentrobust
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Since Hobson's seminal paper [D. Hobson: Robust hedging of the lookback option. In: Finance Stoch. (1998)] the connection between model-independent pricing and the Skorokhod embedding problem has been a driving force in robust finance. We establish a general pricing-hedging duality for financial derivatives which are susceptible to the Skorokhod approach. Using Vovk's approach to mathematical finance we derive a model-independent super-replication theorem in continuous time, given information on finitely many marginals. Our result covers a broad range of exotic derivatives, including lookback options, discretely monitored Asian options, and options on realized variance.
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