IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1709.09442.html
   My bibliography  Save this paper

Market Delay and G-expectations

Author

Listed:
  • Yan Dolinsky
  • Jonathan Zouari

Abstract

We study super-replication of contingent claims in markets with delayed filtration. The first result in this paper reveals that in the Black--Scholes model with constant delay the super-replication price is prohibitively costly and leads to trivial buy-and-hold strategies. Our second result says that the scaling limit of super--replication prices for binomial models with a fixed number of times of delay $H$ is equal to the $G$--expectation with volatility uncertainty interval $[0,\sigma\sqrt{H+1}]$.

Suggested Citation

  • Yan Dolinsky & Jonathan Zouari, 2017. "Market Delay and G-expectations," Papers 1709.09442, arXiv.org, revised Dec 2018.
  • Handle: RePEc:arx:papers:1709.09442
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1709.09442
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter Bank & Yan Dolinsky & Ari-Pekka Perkkiö, 2017. "The scaling limit of superreplication prices with small transaction costs in the multivariate case," Finance and Stochastics, Springer, vol. 21(2), pages 487-508, April.
    2. Tomoyuki Ichiba & Seyyed Mostafa Mousavi, 2017. "Option Pricing with Delayed Information," Papers 1707.01600, arXiv.org.
    3. Martin Schweizer, 1994. "Risk‐Minimizing Hedging Strategies Under Restricted Information," Mathematical Finance, Wiley Blackwell, vol. 4(4), pages 327-342, October.
    4. Rüdiger Frey, 2000. "Risk Minimization with Incomplete Information in a Model for High‐Frequency Data," Mathematical Finance, Wiley Blackwell, vol. 10(2), pages 215-225, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dolinsky, Yan & Zouari, Jonathan, 2020. "Market delay and G-expectations," Stochastic Processes and their Applications, Elsevier, vol. 130(2), pages 694-707.
    2. Peter Bank & Yan Dolinsky, 2020. "A Note on Utility Indifference Pricing with Delayed Information," Papers 2011.05023, arXiv.org, revised Mar 2021.
    3. Tomoyuki Ichiba & Seyyed Mostafa Mousavi, 2017. "Option Pricing with Delayed Information," Papers 1707.01600, arXiv.org.
    4. Ceci, Claudia & Colaneri, Katia & Cretarola, Alessandra, 2014. "A benchmark approach to risk-minimization under partial information," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 129-146.
    5. Ceci, Claudia & Cretarola, Alessandra & Russo, Francesco, 2014. "BSDEs under partial information and financial applications," Stochastic Processes and their Applications, Elsevier, vol. 124(8), pages 2628-2653.
    6. Yan Dolinsky & Or Zuk, 2023. "Explicit Computations for Delayed Semistatic Hedging," Papers 2308.10550, arXiv.org, revised Sep 2024.
    7. Jin Sun & Eckhard Platen, 2019. "Benchmarked Risk Minimizing Hedging Strategies for Life Insurance Policies," Research Paper Series 399, Quantitative Finance Research Centre, University of Technology, Sydney.
    8. Ke Du, 2013. "Commodity Derivative Pricing Under the Benchmark Approach," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2, July-Dece.
    9. Dolinsky, Yan & Zouari, Jonathan, 2021. "The value of insider information for super-replication with quadratic transaction costs," Stochastic Processes and their Applications, Elsevier, vol. 131(C), pages 394-416.
    10. Michael Mania & Marina Santacroce, 2008. "Exponential Utility Maximization under Partial Information," ICER Working Papers - Applied Mathematics Series 24-2008, ICER - International Centre for Economic Research.
    11. Yan Dolinsky, 2023. "Delayed Semi-static Hedging in the Continuous Time Bachelier Model," Papers 2311.17270, arXiv.org, revised Sep 2024.
    12. Mercurio, Fabio, 2001. "Claim pricing and hedging under market incompleteness and "mean-variance" preferences," European Journal of Operational Research, Elsevier, vol. 133(3), pages 635-652, September.
    13. Lin, Zhongguo & Han, Liyan & Li, Wei, 2021. "Option replication with transaction cost under Knightian uncertainty," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 567(C).
    14. Consuela-Elena Popescu & Georgiana Vrinceanu & Alexandra Horobet & Lucian Belascu, 2020. "Managing Exchange Rate Risk with Derivatives: An Application of the Hedge Ratio," Business & Management Compass, University of Economics Varna, issue 3, pages 316-327.
    15. Martin Schweizer & Danijel Zivoi & Mario Šikić, 2018. "Dynamic Mean–Variance Optimization Problems With Deterministic Information," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-38, March.
    16. M. Mania & R. Tevzadze & T. Toronjadze, 2007. "$L^2$-approximating pricing under restricted information," Papers 0708.4095, arXiv.org.
    17. Ceci, Claudia & Colaneri, Katia & Cretarola, Alessandra, 2015. "Hedging of unit-linked life insurance contracts with unobservable mortality hazard rate via local risk-minimization," Insurance: Mathematics and Economics, Elsevier, vol. 60(C), pages 47-60.
    18. Ke Du, 2013. "Commodity Derivative Pricing Under the Benchmark Approach," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2013, January-A.
    19. Chong, Wing Fung, 2019. "Pricing and hedging equity-linked life insurance contracts beyond the classical paradigm: The principle of equivalent forward preferences," Insurance: Mathematics and Economics, Elsevier, vol. 88(C), pages 93-107.
    20. Romuald Momeya & Zied Salah, 2012. "The Minimal Entropy Martingale Measure (MEMM) for a Markov-Modulated Exponential Lévy Model," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 19(1), pages 63-98, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1709.09442. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.