Super- and Sub-Replication

Robert Jarrow ()

Chapter Chapter 21 in Continuous-Time Asset Pricing Theory, 2021, pp 411-417 from Springer

Abstract: Abstract This chapter studies super- and sub-replication in a trading constrained market. In a trading constrained market, not all derivatives can be synthetically constructed using constrained admissible s.f.t.s. To price derivatives, we can obtain upper and lower bounds using super- and sub-replication. This is analogous to super- and sub-replication in an incomplete but unconstrained market, see Chap. 8 . To obtain the desired results, we need to add more structure to the trading constrained normalized market S , 𝔽 , ℙ $$\left (S,\mathbb {F},\mathbb {P}\right )$$ where the money market account B t = 1 for all t ≥ 0.

Date: 2021
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DOI: 10.1007/978-3-030-74410-6_21

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