Pricing and hedging European options with discrete-time coherent risk

Cherny, Alexander
October 2007
Finance & Stochastics;2007, Vol. 11 Issue 4, p537
Academic Journal
The aim of the paper is to provide as explicit as possible expressions for upper/lower prices and for superhedging/subhedging strategies based on discrete-time coherent risk measures. This is done on three levels of generality. For a general infinite-dimensional model, we prove the fundamental theorem of asset pricing. For a general multidimensional model, we provide expressions for prices and hedges. For a wide class of models, in particular, including GARCH, we give more concrete formulas, a sufficient condition for the uniqueness of a hedging strategy, and a numerical algorithm.


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