Superreplication of European multiasset derivatives with bounded stochastic volatility

Superreplication of European multiasset derivatives with bounded stochastic volatility

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Article ID: iaor20031010
Country: Germany
Volume: 55
Issue: 1
Start Page Number: 69
End Page Number: 91
Publication Date: Jan 2002
Journal: Mathematical Methods of Operations Research (Heidelberg)
Authors: ,
Keywords: financial
Abstract:

In this paper we analyze the superreplication approach in stochastic volatility models in the case of European multiasset derivatives. We prove that the Black–Scholes–Barenblatt (B) equation gives a superhedging strategy even if its solution is not twice differentiable. This is done under convexity assumptions on the final payoff h that are verified in some applications presented here.

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