Super-Hedging American Options with Semi-Static Trading Strategies Under Model Uncertainty

8 Pages Posted: 28 May 2016  

Erhan Bayraktar

University of Michigan at Ann Arbor - Department of Mathematics

Zhou Zhou

University of Minnesota - Twin Cities

Date Written: May 27, 2016

Abstract

We consider the super-hedging price of an American option in a discrete-time market in which stocks are available for dynamic trading and European options are available for static trading. We show that the super-hedging price is given by the supremum over the prices of the American option under randomized models.

Keywords: American options, super-hedging, model uncertainty, semi-static trading strategies, randomized models

Suggested Citation

Bayraktar, Erhan and Zhou, Zhou, Super-Hedging American Options with Semi-Static Trading Strategies Under Model Uncertainty (May 27, 2016). Available at SSRN: https://ssrn.com/abstract=2785625 or http://dx.doi.org/10.2139/ssrn.2785625

Erhan Bayraktar (Contact Author)

University of Michigan at Ann Arbor - Department of Mathematics ( email )

2074 East Hall
530 Church Street
Ann Arbor, MI 48109-1043
United States

Zhou Zhou

University of Minnesota - Twin Cities ( email )

420 Delaware St. SE
Minneapolis, MN 55455
United States

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