Superreplication of options on several underlying assets
Erik Ekström, Svante Janson, and Johan Tysk
Source: J. Appl. Probab. Volume 42, Number 1
(2005), 27-38.
Abstract
We investigate the conditions on a hedger, who overestimates the (time- and level-dependent) volatility, to superreplicate a convex claim on several underlying assets. It is shown that the classic Black-Scholes model is the only model, within a large class, for which overestimation of the volatility yields the desired superreplication property. This is in contrast to the one-dimensional case, in which it is known that overestimation of the volatility with any time- and level-dependent model guarantees superreplication of convex claims.
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Links and Identifiers
Permanent link to this document: http://projecteuclid.org/euclid.jap/1110381368
Digital Object Identifier: doi:10.1239/jap/1110381368
Zentralblatt MATH identifier: 02199090
Mathematical Reviews number (MathSciNet): MR2144090
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