Date: Wednesday 27 November 2PM - Room 210, Mathematical Sciences Building
Abstract: A new approach for solving the problems of pricing and hedging derivatives is introduced in a general frictionless market setting. The method is applicable even in cases where an equivalent local martingale measure fails to exist. Our main results include a new superhedging duality for American options when wealth processes can be negative. This answers one of the questions raised in Fernholz, R., Karatzas, I., Kardaras, C. (2005). Diversity and relative arbitrage in equity markets. Finance and Stochastics, 9, 1-27. This is joint with Miklos Rasonyi.