Option Pricing for Finite Models with Limits on Hedging

@inproceedings{Stockbridge2002OptionPF,
  title={Option Pricing for Finite Models with Limits on Hedging},
  author={Richard H. Stockbridge},
  year={2002}
}
This paper characterizes the upper hedging price for a contingent claim in an incomplete market in discrete time consisting, for simplicity, of a single stock and bond. The hedging strategy is required to be selfnancing, and super-replicating. Strict constraints are also considered which limit how much can be borrowed and how much stock can be short-sold during any period. The price is determined via a linear program which the optimal hedging policy must satisfy. An application of duality… CONTINUE READING

Citations

Publications citing this paper.

Measures of model uncertainty and calibrated option bounds

VIEW 3 EXCERPTS
CITES BACKGROUND
HIGHLY INFLUENCED