Retarded action principle and self-financing portfolio dynamics

2015/09/30 by Dmitry Lesnik, Lesnik, Dmitry
Economics, Econometrics and Finance · #60H15 #91G10 #Chaotic Dynamics (nlin.CD) #Complex Systems and Time Series Analysis #FOS: Economics and business #FOS: Physical sciences #Financial Markets and Investment Strategies #Mathematical Finance (q-fin.MF) #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.1510.00352

openalex publication_date 2015/09/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We derive a consistent differential representation for the dynamics of a self-financing portfolio for different hedging strategies. In the basis of the derivation there is the so called "retarded action principle", which represents the causality in the evolution of dependent stochastic variables. We demonstrate this principle on example of a vanilla and a storage option.

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