Superreplication with Proportional Transaction Cost Under Model Uncertainty
24 Pages Posted: 28 May 2020
Date Written: July 2019
We consider a discrete‐time financial market with proportional transaction cost under model uncertainty, and study a superreplication problem. We recover the duality results that are well known in the classical dominated context. Our key argument consists in using a randomization technique together with the minimax theorem to convert the initial problem to a frictionless problem on an enlarged space. This allows us to appeal to the techniques and results of Bouchard and Nutz to obtain the duality result.
Keywords: duality, model uncertainty, superreplication, transaction cost
Suggested Citation: Suggested Citation