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 language | English (US) |
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Pages (from-to) | 3893-3931 |
Number of pages | 39 |
Journal | Stochastic Processes and their Applications |
Volume | 125 |
Issue number | 10 |
DOIs | |
State | Published - Jul 30 2015 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Statistics and Probability
- Modeling and Simulation
- Applied Mathematics
Keywords
- Martingale Optimal Transport
- Model-free Hedging
- Skorokhod Space