Martingale Optimal Transport in the Skorokhod Space

Yan Dolinsky and Mete Soner
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Yan Dolinsky: Hebrew University of Jerusalem
Mete Soner: ETH Zurich and Swiss Finance Institute

No 14-62, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The dual representation of the martingale optimal transport problem in the Skorokhod space of multi dimensional cadlag 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: Robust hedging; Martingale Optimal Transport; Super-replication (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-10
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1462

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