Super-replication in extremely incomplete markets

Yan Dolinsky (The Hebrew University of Jerusalem)
Thursday, May 26, 2016 - 5:00pm
TU Berlin, Straße des 17. Juni 136, 10623 Berlin, Raum MA 043

In this work we introduce the notion of extremely incomplete markets. We prove that for these markets the super–replication price coincide with the model free super–replication price. Namely, the knowledge of the model does not reduce the super–replication price. We provide two families of extremely incomplete models: stochastic volatility models and rough volatility models. Moreover, we give several computational examples. Our approach is purely probabilistic. (joint work with A.Neufeld)