Games and Decisions 2

Pathwise computation of the gain of trading strategies and pathwise robustness of delta hedging

speaker: Candia Riga (Scuola Normale Superiore di Pisa)

abstract: Whereas pricing of derivatives involves averaging of payoffs over scenarios, the analysis of hedging strategies is concerned with their loss in a single scenario, the realized historical scenario, rather than their average performance. We develop a model-free framework for the pathwise analysis of hedging strategies for a general class of continuously-monitored path-dependent derivatives. In particular, we derive a pathwise version of the hedging error of Black-Scholes delta-hedging strategies which extends the classical result to path-dependent options and we provide a sufficient condition assuring robustness of the delta hedge. Finally, we prove the existence of a pricing functional vertically smooth under appropriate regularity of the payoff functional, without any probabilistic assumptions on the true underlying price process.

timetable:
Mon 7 Jul, 16:00 - 16:30, Sala Azzurra
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