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The Duality Principle for Multidimensional Optional Semimartingales

Mahdieh Aminian Shahrokhabadi (), Alexander Melnikov and Andrey Pak
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Mahdieh Aminian Shahrokhabadi: Mathematics and Statistical Sciences Department, Faculty of Science, University of Alberta, Central Academic Building, Edmonton, AB T6G 2G1, Canada
Alexander Melnikov: Mathematics and Statistical Sciences Department, Faculty of Science, University of Alberta, Central Academic Building, Edmonton, AB T6G 2G1, Canada
Andrey Pak: SS&C Technologies, Toronto, ON M5V 3K2, Canada

JRFM, 2024, vol. 17, issue 2, 1-22

Abstract: In option pricing, we often deal with options whose payoffs depend on multiple factors such as foreign exchange rates, stocks, etc. Usually, this leads to a knowledge of the joint distributions and complicated integration procedures. This paper develops an alternative approach that converts the option pricing problem into a dual one and presents a solution to the problem in the optional semimartingale setting. The paper contains several examples which illustrate its results in terms of the parameters of models and options.

Keywords: optional semimartingales; derivative pricing; duality relations (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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