Pricing under dynamic risk measures

Abstract

In this paper, we study the discrete-time super-replication problem of contingent claims with respect to an acceptable terminal discounted cash flow. Based on the concept of Immediate Profit, i.e., a negative price which super-replicates the zero contingent claim, we establish a weak version of the fundamental theorem of asset pricing. Moreover, time consistency is discussed and we obtain a representation formula for the minimal super-hedging prices of bounded contingent claims.

Keywords

• super-hedging
• dynamic risk measures
• time consistency
• absence of immediate profit
• pricing
• 49j53
• 60d05
• 91g20
• 91g80