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

^*Corresponding author for this work

BA Business Department

Research output: Contribution to journal › Article › peer-review

2 Scopus citations

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

Bibliographical note

Publisher Copyright:
© 2019 Elsevier B.V.

Keywords

Duality
G-expectation
Market delay
Super-replication

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10.1016/j.spa.2019.03.007

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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].

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KW - Super-replication

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Market delay and G-expectations

Abstract

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Keywords

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