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Hedging of claims with physical delivery under convex transaction costs

Please always quote using this URN:urn:nbn:de:0296-matheon-6398
  • We study superhedging of contingent claims with physical delivery in a discrete-time market model with convex transaction costs. Our model extends Kabanov's currency market model by allowing for nonlinear illiquidity effects. We show that an appropriate generalization of Schachermayer's robust no arbitrage condition implies that the set of claims hedgeable with zero cost is closed in probability. Combined with classical techniques of convex analysis, the closedness yields a dual characterization of premium processes that are sufficient to superhedge a given claim process. We also extend the fundamental theorem of asset pricing for general conical models.

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Metadaten
Author:Teemu Pennanen, Irina Penner
URN:urn:nbn:de:0296-matheon-6398
Referee:Dirk Becherer
Document Type:Preprint, Research Center Matheon
Language:English
Date of first Publication:2009/07/26
Release Date:2009/07/26
Preprint Number:644
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