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


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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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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/

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Frey, Rüdiger (Details)
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Institute for Statistics and Mathematics IN (Details)
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