Market delay and G-expectations

Research output: Contribution to journalArticlepeer-review

Abstract

We study super-replication of contingent claims in markets with delayed filtration. The first result in this paper reveals that in the Black–Scholes model with constant delay the super-replication price is prohibitively costly and leads to trivial buy-and-hold strategies. Our second result says that the scaling limit of super-replication prices for binomial models with a fixed number of times of delay H is equal to the G-expectation with volatility uncertainty interval [0,σH+1].

Original languageAmerican English
Pages (from-to)694-707
Number of pages14
JournalStochastic Processes and their Applications
Volume130
Issue number2
DOIs
StatePublished - Feb 2020

Keywords

  • Duality
  • G-expectation
  • Market delay
  • Super-replication

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Modelling and Simulation
  • Applied Mathematics

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