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Martingale optimal transport in the Skorokhod space

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  • Dolinsky, Yan
  • Soner, H. Mete

Abstract

The dual representation of the martingale optimal transport problem in the Skorokhod space of multi dimensional cádlág processes is proved. The dual is a minimization problem with constraints involving stochastic integrals and is similar to the Kantorovich dual of the standard optimal transport problem. The constraints are required to hold for every path in the Skorokhod space. This problem has the financial interpretation as the robust hedging of path dependent European options.

Suggested Citation

  • Dolinsky, Yan & Soner, H. Mete, 2015. "Martingale optimal transport in the Skorokhod space," Stochastic Processes and their Applications, Elsevier, vol. 125(10), pages 3893-3931.
    • Handle: RePEc:eee:spapps:v:125:y:2015:i:10:p:3893-3931
    DOI: 10.1016/j.spa.2015.05.009
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    References listed on IDEAS

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