On the super-replicating approach when trading a derivative is limited
Year: 2008
Type: article
Abstract: We extend the theory of super-replicating a European option by relaxing its two main assumptions: We take into account the constraints on trading the option and allow it to be traded inter-temporally. The first extension has a dramatic effect on the price of a portfolio hedging the option, while the second one has a dramatic effect on finding arbitrage opportunities in the market. We introduce a new approach for identifying the best arbitrage opportunities in the market with frictions.
Source: Quantitative Finance
Author: Sergei Isaenko
Institution: Concordia University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2023530508