Quotation Frey, Rüdiger. 2000. Superreplication in Stochastic Volatility Models and Optimal Stopping. Finance and Stochastics (4): 161-188.




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.


Press 'enter' for creating the tag

Publication's profile

Status of publication Published
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/


Frey, Rüdiger (Details)
Institute for Statistics and Mathematics IN (Details)
Google Scholar: Search