Martingale optimal transport in the Skorokhod space

Yan Dolinsky, H. Mete Soner*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

38 Scopus citations

Abstract

The dual representation of the martingale optimal transport problem in the Skorokhod space of multi dimensional cádlág processes is proved. The dual is a minimization problem with constraints involving stochastic integrals and is similar to the Kantorovich dual of the standard optimal transport problem. The constraints are required to hold for every path in the Skorokhod space. This problem has the financial interpretation as the robust hedging of path dependent European options.

Original languageAmerican English
Pages (from-to)3893-3931
Number of pages39
JournalStochastic Processes and their Applications
Volume125
Issue number10
DOIs
StatePublished - 30 Jul 2015

Bibliographical note

Publisher Copyright:
© 2015 Elsevier B.V. All rights reserved.

Keywords

  • Martingale Optimal Transport
  • Model-free Hedging
  • Skorokhod Space

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