Wednesday, January 9, 2019 - 15:00 in V3-201
Pathwise pricing-hedging duality in continuous time
A talk in the Bielefeld Stochastic Afternoon series by
David Prömel from University of Oxford
| Abstract: |
In the analysis of the financial crises 2008, risk caused by financial modelling was identified as one of the main challenges. In order to reduce the model risk, we discuss an economically justified and model-independent approach to finance, which allows us to characterize the typical behaviour of price paths. In this model-independent framework we recover a fundamental result from classical mathematical finance: the pricing-hedging duality. Our robust duality states that, for any financial option, the pathwise super-hedging price of the option coincides with the robust version of the model-price given by the supremum of the expectation of the option with respect to martingale measures.
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