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Superhedging under ratio constraint

Yingshan Chen, Min Dai, Jing Xu () and Mingyu Xu

Journal of Economic Dynamics and Control, 2015, vol. 58, issue C, 250-264

Abstract: We consider superhedging of contingent claims under ratio constraint. It has been widely recognized that the minimum cost of superhedging a contingent claim with certain portfolio constraints is equal to the price of a claim with appropriately modified payoff but without constraints. In terms of the backward stochastic differential equation (BSDE) and the variational inequality equation approach, we revisit this result and provide two counterexamples.

Keywords: Superhedging; Ratio constraint; European option; Asian option (search for similar items in EconPapers)
JEL-codes: C63 G13 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:58:y:2015:i:c:p:250-264

DOI: 10.1016/j.jedc.2015.06.009

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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