Market delay and G-expectations

Yan Dolinsky; Jonathan Zouari

doi:10.1016/j.spa.2019.03.007

Market delay and G-expectations

Yan Dolinsky, Jonathan Zouari

BA Business Department

The Hebrew University of Jerusalem

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	694-707
Number of pages	14
Journal	Stochastic Processes and their Applications
Volume	130
Issue number	2
DOIs	https://doi.org/10.1016/j.spa.2019.03.007
State	Published - 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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10.1016/j.spa.2019.03.007

Cite this

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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].",

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AB - 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].

KW - Duality

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KW - Market delay

KW - Super-replication

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DO - 10.1016/j.spa.2019.03.007

M3 - مقالة

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JO - Stochastic Processes and their Applications

JF - Stochastic Processes and their Applications

IS - 2

ER -

Market delay and G-expectations

Abstract

Keywords

All Science Journal Classification (ASJC) codes

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