Abstract
As we saw in Chapter 5, when a financial market is incomplete due to portfolio constraints, it may no longer be possible to construct a perfect hedge for contingent claims. This led to the introduction in that chapter of superreplicating portfolios and upper-hedging prices for contingent claims. This is a conservative approach to pricing, since it begins from the assumption that agents trade only if their probability of loss is zero.
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© 1998 Springer-Verlag New York, Inc.
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Karatzas, I., Shreve, S.E. (1998). Constrained Consumption and Investment. In: Methods of Mathematical Finance. Applications of Mathematics, vol 39. Springer, New York, NY. https://doi.org/10.1007/978-0-387-22705-4_6
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DOI: https://doi.org/10.1007/978-0-387-22705-4_6
Publisher Name: Springer, New York, NY
Print ISBN: 978-1-4419-2852-8
Online ISBN: 978-0-387-22705-4
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