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

Acciaio, Beatrice, 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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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
Divisions:	Statistics
Subjects:	H Social Sciences > HG Finance Q Science > QA Mathematics
Date Deposited:	14 Mar 2017 09:28
Last Modified:	14 Sep 2024 07:24
URI:	http://eprints.lse.ac.uk/id/eprint/69804

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