Frey, Rüdiger. 2000. Superreplication in Stochastic Volatility Models and Optimal Stopping. Finance and Stochastics (4): 161-188.
BibTeX
Abstract
In this paper we discuss the superreplication of derivatives in a stochastic volatility model under the additional assumption that the volatility follows a bounded process. We characterize the value process of our superhedging strategy by an optimal-stopping problem in the context of the Black-Scholes model which is similar to the optimal stopping problem that arises in the pricing of American-type derivatives. Our proof is based on probabilistic arguments. We study the minimality of these superhedging strategies and discuss PDE-characterizations of the value function of our superhedging strategy. We illustrate our approach by examples and simulations.
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Status of publication | Published |
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Affiliation | WU |
Type of publication | Journal article |
Journal | Finance and Stochastics |
Citation Index | SSCI |
WU Journalrating 2009 | A |
WU-Journal-Rating new | FIN-A, STRAT-B, VW-B, WH-B |
Language | English |
Title | Superreplication in Stochastic Volatility Models and Optimal Stopping |
Number | 4 |
Year | 2000 |
Page from | 161 |
Page to | 188 |
URL | http://www.math.ethz.ch/~finasto/ |