2018/07/12 by Baptiste, Julien, Carassus, Laurence, Lépinette, Emmanuel
#FOS: Economics and business #Mathematical Finance (q-fin.MF)
paper · doi:10.48550/arxiv.1807.04612
For several decades, the no-arbitrage (NA) condition and the martingale measures have played a major role in the financial asset's pricing theory. We propose a new approach for estimating the super-replication cost based on convex duality instead of martingale measures duality: Our prices will be expressed using Fenchel conjugate and bi-conjugate. The super-hedging problem leads endogenously to a weak condition of NA called Absence of Immediate Profit (AIP). We propose several characterizations of AIP and study the relation with the classical notions of no-arbitrage. We also give some promising numerical illustrations.