WIAS Preprint No. 928, (2004)

Optimal superhedging under nonconvex constraints -- A BSDE approach



Authors

  • Bender, Christian
  • Kohlmann, Michael

2010 Mathematics Subject Classification

  • 91B28 91B24 93E20 60H10

Keywords

  • BSDE, Constraints, Penalization, Superhedging

Abstract

We apply theoretical results of S. Peng on supersolutions for BSDEs to the problem of finding optimal superhedging strategies in a Black-Scholes market under constraints. Constraints may be imposed simultaneously on wealth process and portfolio. They may be nonconvex, time-dependent, and random. Constraints on the portfolio may e.g. be formulated in terms of the amount of money invested, the portfolio proportion, or the number of shares held.

Appeared in

  • Int. J. Theor. Appl. Finance, 11 pp. 363--380.

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