The Skorokhod Embedding Problem and Model-Independent Bounds for Option Prices

@inproceedings{Hobson2009TheSE,
  title={The Skorokhod Embedding Problem and Model-Independent Bounds for Option Prices},
  author={David Hobson},
  year={2009}
}
This set of lecture notes is concerned with the following pair of ideas and concepts: 1) The Skorokhod Embedding problem (SEP) is, given a stochastic process X = (Xt)t≥0 and a measure μ on the state space of X, to find a stopping time τ such that the stopped process Xτ has law μ. Most often we take the process X to be Brownian motion, and μ to be a centred probability measure. 2) The standard approach for the pricing of financial options is to postulate a model and then to calculate the price… CONTINUE READING
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