Çağın Ararat (University of Leeds) – Superhedging under Proportional Transaction Costs in Continuous Time
- Date
- @ Roger Stevens LT 11, 15:00
- Location
- Roger Stevens LT 11
- Notes
- Speaker
- Çağın Ararat
- Affiliation
- University of Leeds
- Slides
- Category
- Probability
We revisit the well-studied superhedging problem under proportional transaction costs in continuous time using the recently developed tools of set-valued stochastic analysis. By relying on a simple Black-Scholes-type market model for mid-prices and using continuous trading schemes, we define a dynamic family of superhedging sets in continuous time and express them in terms of set-valued integrals. We show that these sets, defined as subsets of Lebesgue spaces at different times, form a dynamic set-valued risk measure with multi-portfolio time-consistency. Finally, we transfer the problem formulation to a path-space setting and introduce approximate versions of superhedging sets that will involve relaxing the superhedging inequality, the superhedging probability, and the solvency requirement for the superhedging strategy with a predetermined error level. In this more technical framework, we are able to relate the approximate superhedging sets at different times by means of a set-valued Bellman’s principle. We conjecture that this pathwise principle can be used to obtain a set-valued differential structure that characterizes the superhedging sets. Joint work with Atiqah Almuzaini and Jin Ma.