Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25105
Authors: 
Bentahar, Imen
Bouchard, Bruno
Year of Publication: 
2006
Series/Report no.: 
SFB 649 discussion paper 2006,022
Abstract: 
We study the problem of finding the minimal initial capital needed in order to hedge without risk a barrier option when the vector of proportions of wealth invested in each risky asset is constraint to lie in a closed convex domain. In the context of a Brownian diffusion model, we provide a PDE characterization of the super-hedging price. This extends the result of Broadie, Cvitanic and Soner (1998) and Cvitanic, Pham and Touzi (1999) which was obtained for plain vanilla options, and provides a natural numerical procedure for computing the corresponding super-hedging price. As a by-product, we obtain a comparison theorem for a class of parabolic PDE with relaxed Dirichet conditions involving a constraint on the gradient.
Subjects: 
Super-replication
barrier options
portfolio constraints
viscosity solutions
Document Type: 
Working Paper

Files in This Item:
File
Size
516.46 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.