The robust pricing–hedging duality for American options in discrete time financial markets
Aksamit, Anna; Deng, Shuoqing; Obloj , Jan; Tan, Xiaolu (2019), The robust pricing–hedging duality for American options in discrete time financial markets, Mathematical Finance, 29, 3, p. 861-897. 10.1111/mafi.12199
TypeArticle accepté pour publication ou publié
Journal nameMathematical Finance
MetadataShow full item record
Abstract (EN)We aim to generalize the duality results of Bouchard & Nutz  to the case of American options. By introducing an enlarged canonical space, we reformulate the superhedging problem for American options as a problem for European options. Then in a discrete time market with finitely many liquid options, we show that the minimum superhedging cost of an American option equals to the supremum of the expectation of the payoff at all (weak) stopping times and under a suitable family of martingale measures. Moreover, by taking the limit on the number of liquid options, we obtain a new class of martingale optimal transport problems as well as a Kantorovich duality result.
Subjects / KeywordsSuper-replication; American option; nondominated model; martingale; optimal transport; Kantorovich duality
Showing items related by title and author.