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Pathwise superhedging under proportional transaction costs

Author

Listed:
  • Mun-Chol Kim

    (Kim Il Sung University)

  • Song-Chol Ryom

    (Institute of Mathematics, State Academy of Sciences)

Abstract

We prove a pathwise superhedging duality for multi-dimensional options in model-free discrete time market with proportional efficient frictions. Firstly we prove a pathwise superhedging duality for European options under some no-arbitrage condition. As a consequence, we next obtain representations of pathwise superhedging prices of American options. Moreover, the main result gives dual representations of pathwise superhedging prices defined in terms of strategies predictable with respect to universal filtration, under strict no-arbitrage and the set-theoretic axiom which guarantees that all projective sets of Polish space are universally measurable.

Suggested Citation

  • Mun-Chol Kim & Song-Chol Ryom, 2022. "Pathwise superhedging under proportional transaction costs," Mathematics and Financial Economics, Springer, volume 16, number 4, October.
    • Handle: RePEc:spr:mathfi:v:16:y:2022:i:4:d:10.1007_s11579-022-00322-8
    DOI: 10.1007/s11579-022-00322-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Model uncertainty; Pathwise superhedging; Proportional transaction costs; Strict no-arbitrage; Union of projective classes;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G - Financial Economics

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