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

RIS

@ARTICLE{Frey2000,
title = {Superreplication in Stochastic Volatility Models and Optimal Stopping},
author = {Rüdiger Frey},
year = {2000},
url = {http://www.math.ethz.ch/~finasto/},
number = {4},
language = {EN},
pages = {161-188},
journal = {Finance and Stochastics},
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.},
}