Superhedging Under Ratio Constraint
20 Pages Posted: 31 Dec 2014
Date Written: December 31, 2014
We consider superhedging of contingent claims under ratio constraint. It has been widely recognized that the minimum cost of superhedging a contingent claim with certain constraints is equal to the price of a dominating claim without constraints. In terms of the backward stochastic differential equation and the variational inequality equation approach, we revisit this result and provide two counterexamples.
Keywords: superhedging, ratio constraint, dominating claim, counterexample
JEL Classification: G12, G13
Suggested Citation: Suggested Citation