Martingale optimal transport in the Skorokhod space

Yan Dolinsky; H. Mete Soner

doi:10.1016/j.spa.2015.05.009

Martingale optimal transport in the Skorokhod space

Yan Dolinsky
, H. Mete Soner

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

40 Citations (Scopus)

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
Pages (from-to)	3893-3931
Number of pages	39
Journal	Stochastic Processes and their Applications
Volume	125
Issue number	10
DOIs	https://doi.org/10.1016/j.spa.2015.05.009
Publication status	Published - 30 Jul 2015
Externally published	Yes

Keywords

Martingale Optimal Transport
Model-free Hedging
Skorokhod Space

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10.1016/j.spa.2015.05.009

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abstract = "The dual representation of the martingale optimal transport problem in the Skorokhod space of multi dimensional c{\'a}dl{\'a}g 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.",

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AB - 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.

KW - Martingale Optimal Transport

KW - Model-free Hedging

KW - Skorokhod Space

UR - https://www.scopus.com/pages/publications/84938420341

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ER -

Martingale optimal transport in the Skorokhod space

Abstract

Keywords

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Other files and links

Erratum: Martingale optimal transport in the Skorokhod space (Stochastic Processes and their Applications (2015) 125:10 (3893-3931))

Cite this