Robust Hedging of American Options via Aggregated Snell Envelopes

2025/06/17 by Marco Rodrigues, Rodrigues, Marco
Economics, Econometrics and Finance · #60G40 #60G44 #91G20 #93E20 #Capital Investment and Risk Analysis #FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Optimization and Control (math.OC) #Probability (math.PR) #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.2506.14553

openalex publication_date 2025/06/17 · openalex created_date 2025/10/18 · openalex updated_date 2026/07/28

Abstract

We construct an aggregator for a family of Snell envelopes in a nondominated framework. We apply this construction to establish a robust hedging duality, along with the existence of a minimal hedging strategy, in a general semi-martingale setting for American-style options. Our results encompass continuous processes, or processes with jumps and non-vanishing diffusion. A key application is to financial market models, where uncertainty is quantified through the semi-martingale characteristics.

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Related

• Martingale Optimal Transport and Robust Hedging in Continuous Time
• Robust pricing--hedging duality for American options in discrete time\n financial markets
• Robust Pricing and Hedging of American Options in Continuous Time
• Super-hedging American Options with Semi-static Trading Strategies under Model Uncertainty
• On hedging American options under model uncertainty