Martingale optimal transport in the Skorokhod space

Yan Dolinsky and H. Mete Soner

Stochastic Processes and their Applications, 2015, vol. 125, issue 10, 3893-3931

Abstract: The dual representation of the martingale optimal transport problem in the Skorokhod space of multi dimensional cádlág processes is proved. The dual is a minimization problem with constraints involving stochastic integrals and is similar to the Kantorovich dual of the standard optimal transport problem. The constraints are required to hold for every path in the Skorokhod space. This problem has the financial interpretation as the robust hedging of path dependent European options.

Keywords: Model-free Hedging; Martingale Optimal Transport; Skorokhod Space (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (34)

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DOI: 10.1016/j.spa.2015.05.009

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