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Buy-And-Hold Property For Fully Incomplete Markets When Super-Replicating Markovian Claims

Author

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  • ARIEL NEUFELD

    (RiskLab, Department of Mathematics, ETH Zurich, Rämistrasse 101, 8092 Zürich, Switzerland)

Abstract

We show that when the price process S represents a fully incomplete market, the optimal super-replication of any Markovian claim g(ST) with g(⋅) being nonnegative and lower semicontinuous is of buy-and-hold type. Since both (unbounded) stochastic volatility models and rough volatility models are examples of fully incomplete markets, one can interpret the buy-and-hold property when super-replicating Markovian claims as a natural phenomenon in incomplete markets.

Suggested Citation

  • Ariel Neufeld, 2018. "Buy-And-Hold Property For Fully Incomplete Markets When Super-Replicating Markovian Claims," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 21(08), pages 1-12, December.
    • Handle: RePEc:wsi:ijtafx:v:21:y:2018:i:08:n:s0219024918500516
    DOI: 10.1142/S0219024918500516
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    Citations

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    Cited by:

    1. Jonathan Ansari & Eva Lutkebohmert & Ariel Neufeld & Julian Sester, 2022. "Improved Robust Price Bounds for Multi-Asset Derivatives under Market-Implied Dependence Information," Papers 2204.01071, arXiv.org, revised Sep 2023.
    2. Peter Bank & Yan Dolinsky, 2020. "A Note on Utility Indifference Pricing with Delayed Information," Papers 2011.05023, arXiv.org, revised Mar 2021.
    3. Erhan Bayraktar & Yan Dolinsky & Jia Guo, 2018. "Continuity of Utility Maximization under Weak Convergence," Papers 1811.01420, arXiv.org, revised Jun 2020.
    4. Dolinsky, Yan & Zouari, Jonathan, 2020. "Market delay and G-expectations," Stochastic Processes and their Applications, Elsevier, vol. 130(2), pages 694-707.
    5. Daniel Bartl & Michael Kupper & Ariel Neufeld, 2020. "Pathwise superhedging on prediction sets," Finance and Stochastics, Springer, vol. 24(1), pages 215-248, January.
    6. Ariel Neufeld & Julian Sester, 2021. "Model-free price bounds under dynamic option trading," Papers 2101.01024, arXiv.org, revised Jul 2021.
    7. Jonathan Ansari & Eva Lütkebohmert & Ariel Neufeld & Julian Sester, 2024. "Improved robust price bounds for multi-asset derivatives under market-implied dependence information," Finance and Stochastics, Springer, vol. 28(4), pages 911-964, October.

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