We study pricing and superhedging strategies for game options in an imperfect market with default. We extend the results obtained by Kifer in the case of a perfect market model to the case of imperfections in the market taken into account via the nonlinearity of the wealth dynamics. In this framework, the pricing system is expressed as a nonlinear g-expectation/evaluation induced by a nonlinear BSDE with jump. We prove that the superhedging price of a game option coincides with the value function of a corresponding generalized Dynkin game expressed in terms of the g-evaluation, recently introduced by Dumitrescu,Quenez and Sulem. We then address the case of ambiguity on the model, - for example an ambiguity on the default probability - and characterize the superhedging price of a game option as the value function of a mixed generalized Dynkin game. We prove the existence of a cancellation time and a trading strategy for the seller which allow him/her to be super-hedged, whatever the model is (joint work with M.C.Quenez and A.Sulem).
Roxana Dumitrescu: Game options in an imperfect market with default
Roxana Dumitrescu (King’s College, London) gives a lecture with the title: Game options in an imperfect market with default
Published Mar. 8, 2017 12:16 PM
- Last modified Mar. 8, 2017 12:16 PM