Martingale optimal transport in the Skorokhod space
The dual representation of the martingale optimal transport problem in the Skorokhod space of multi dimensional cadlag 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 very path in the Skorokhod space. This problem has the financial interpretation as the robust hedging of path dependent European options. In this second version, we included the multi-marginal case.
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Sciences Po publications
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- Mark H. A. Davis & David G. Hobson, 2007. "The Range Of Traded Option Prices," Mathematical Finance, Wiley Blackwell, vol. 17(1), pages 1-14.
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