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The space of outcomes of semi-static trading strategies need not be closed

Acciaio, Beatrice and Larsson, Martin and Schachermayer, Walter (2017) The space of outcomes of semi-static trading strategies need not be closed. Finance and Stochastics, 21 (3). pp. 741-751. ISSN 0949-2984

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Identification Number: 10.1007/s00780-017-0329-3

Abstract

Semi-static trading strategies make frequent appearances in mathematical finance, where dynamic trading in a liquid asset is combined with static buy-and-hold positions in options on that asset. We show that the space of outcomes of such strategies can have very poor closure properties when all European options for a fixed date T are available for static trading. This causes problems for optimal investment, and stands in sharp contrast to the purely dynamic case classically considered in mathematical finance.

Item Type: Article
Official URL: https://link.springer.com/journal/780
Additional Information: © 2017 Springer-Verlag Berlin Heidelberg
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Sets: Departments > Statistics
Date Deposited: 14 Mar 2017 09:28
Last Modified: 23 Jun 2017 14:01
URI: http://eprints.lse.ac.uk/id/eprint/69804

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