Guaranteed Deterministic Approach to Superhedging: A Numerical Experiment

Guaranteed Deterministic Approach to Superhedging: A Numerical Experiment

We consider a guaranteed deterministic approach to discrete-time super-replication for guaranteed coverage of contingent claims on options for all possible asset-price scenarios. Price increases during a period are assumed to be contained in a priori specified compacta dependent on price history. A...

Full description

Saved in:
Bibliographic Details
Published in:Computational mathematics and modeling Vol. 32; no. 1; pp. 22 - 44
Main Authors: Andreev, N. A., Smirnov, S. N.
Format: Journal Article
Language:English
Published: New York Springer US 2021
Springer Nature B.V
Subjects:
Algorithms
Applications of Mathematics
Computational Mathematics and Numerical Analysis
Mathematical Modeling and Industrial Mathematics
Mathematics
Mathematics and Statistics
Optimization
Isaacs equation
superhedging
Bellman
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We consider a guaranteed deterministic approach to discrete-time super-replication for guaranteed coverage of contingent claims on options for all possible asset-price scenarios. Price increases during a period are assumed to be contained in a priori specified compacta dependent on price history. A game problem is stated and reduced to the solution of the corresponding Bellman–Isaacs equation. Numerical solution algorithms on a discrete lattice are considered for the Bellman–Isaacs equation. Results of a numerical experiment are reported for various model specifications.
ISSN:1046-283X
1573-837X
DOI:10.1007/s10598-021-09514-1