Abstract
This chapter studies super- and sub-replication in a trading constrained market. In a trading constrained market, not all derivatives can be synthetically constructed using constrained admissible s.f.t.s.’s. To price derivatives, we can obtain upper and lower bounds using super- and sub-replication. This is analogous to super- and sub-replication in an incomplete but unconstrained market, see the super- and sub-replication Chap. 8.
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References
P. Protter, K. Shimbo, No arbitrage and general semimartingales, in Markov Processes and Related Topics: A Festschrift for Thomas G. Kurtz. IMS Collections, vol. 4 (Institute of Mathematical Statistics, Beachwood, OH, 2008)
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Jarrow, R.A. (2018). Super- and Sub-replication. In: Continuous-Time Asset Pricing Theory. Springer Finance(). Springer, Cham. https://doi.org/10.1007/978-3-319-77821-1_21
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DOI: https://doi.org/10.1007/978-3-319-77821-1_21
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