
Open access
Date
2019-08Type
- Journal Article
Abstract
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain abstract (pointwise) fundamental theorem of asset pricing and pricing–hedging duality. Our results are general and, in particular, cover both the so-called model independent case as well as the classical probabilistic case of Dalang–Morton–Willinger. Our analysis is scenario-based: a model specification is equivalent to a choice of scenarios to be considered. The choice can vary between all scenarios and the set of scenarios charged by a given probability measure. In this way, our framework interpolates between a model with universally acceptable broad assumptions and a model based on a specific probabilistic view of future asset dynamics. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000361604Publication status
publishedExternal links
Journal / series
Mathematics of Operations ResearchVolume
Pages / Article No.
Publisher
INFORMSSubject
robust modelling approach; fundamental theorem of asset pricing; superhedging duality; semistatic optimization; pointwise stochastic analysis; arbitrage pricing theory; model ambiguity; Knightian uncertaintyOrganisational unit
03658 - Schweizer, Martin / Schweizer, Martin
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