Ng, Ze-An and Koh, You-Beng and Loo, Tee-How and Yang, Hailiang (2024) Super-replication of life-contingent options under the Black-Scholes framework. Journal of Applied Probability, 61 (4). pp. 1263-1277. ISSN 0021-9002, DOI https://doi.org/10.1017/jpr.2024.10.
Full text not available from this repository.Abstract
We consider the super-replication problem for a class of exotic options known as life-contingent options within the framework of the Black-Scholes market model. The option is allowed to be exercised if the death of the option holder occurs before the expiry date, otherwise there is a compensation payoff at the expiry date. We show that there exists a minimal super-replication portfolio and determine the associated initial investment. We then give a characterisation of when replication of the option is possible. Finally, we give an example of an explicit super-replicating hedge for a simple life-contingent option.
| Item Type: | Article |
|---|---|
| Funders: | Xi'an Jiaotong-Liverpool University (RDF-23-01-006) |
| Uncontrolled Keywords: | Exotic options; option pricing; option hedging; stochastic analysis |
| Subjects: | Q Science > QA Mathematics |
| Divisions: | Faculty of Science > Institute of Mathematical Sciences |
| Depositing User: | Ms. Juhaida Abd Rahim |
| Date Deposited: | 20 Jan 2025 07:06 |
| Last Modified: | 20 Jan 2025 07:06 |
| URI: | http://eprints.um.edu.my/id/eprint/47604 |
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