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Titel
Superhedging prices of European and American options in a non-linear incomplete market with default / Miryana Grigorova, Marie-Clair Quenez and Agnès Sulem
VerfasserGrigorova, Miryana ; Quenez, Marie-Clair ; Sulem, Agnès In der Gemeinsamen Normdatei der DNB nachschlagen
ErschienenBielefeld : Center for Mathematical Economics (IMW), November 2018
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Elektronische Ressource
Umfang1 Online-Ressource (43 Seiten)
SerieCenter for Mathematical Economics Working papers ; 607
URNurn:nbn:de:hbz:6:2-107887 Persistent Identifier (URN)
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Superhedging prices of European and American options in a non-linear incomplete market with default [0.5 mb]
Zusammenfassung

This paper studies the superhedging prices and the associated superhedging strategies for European and American options in a non-linear incomplete market with default. We present the seller's and the buyer's point of view. The underlying market model consists of a risk-free asset and a risky asset driven by a Brownian motion and a compensated default martingale. The portfolio process follows non-linear dynamics with a non-linear driver . By using a dynamic programming approach, we first provide a dual formulation of the seller's (superhedging) price for the European option as the supremum over a suitable set of equivalent probability measures Q Q of the -evaluation/expectation under Q of the payoff. We also provide an infinitesimal characterization of this price as the minimal supersolution of a constrained BSDE with default. By a form of symmetry, we derive corresponding results for the buyer. We also give a dual representation of the seller's (superhedging) price for the American option associated with an irregular payoff (E) (not necessarily càdlàg) in terms of the value of a non-linear mixed control/stopping problem. We also provide an infinitesimal characterization of this price in terms of a constrained reflected BSDE. When E is càdlàg, we show a duality result for the buyer's price. These results rely on first establishing a non-linear optional decomposition for processes which are E-strong supermartingales under Q, for all Q Q

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