Pathwise Superhedging of Asian Claims
Abstract
The talk unveils pathwise superhedging strategies for convex Asian claims using a dynamic hedge in the underlying and a static position in vanilla options. For an Asian call, where the seller is long the matching vanilla contract, the dynamic hedge may involve the time spent by the asset - or its running average - above the strike. The validity of average-based strategies stems from a mysterious identity relating the Asian call payoff to a strip of binary options across maturities. The strategies are then tested on synthetic data, where we compare the variance of their P&Ls and hedging turnover. We finally connect these findings with Martingale Optimal Transport and derive robust price bounds for forward start (convex) Asian claims. Special thanks to Bruno Dupire, Hélyette Geman, Julien Guyon, Bryan Liang, Marcel Nutz, and Nizar Touzi.
About the speaker
Valentin Tissot-Daguette is a quantitative researcher at Bloomberg. He recently obtained his PhD degree from Princeton University, under the co-supervision of Prof. Mete Soner and Bruno Dupire. Previously, Valentin studied at EPFL and ETH Zurich where he completed a Bachelor's degree in Mathematics and a Master's degree in Financial Engineering. His research interests include exotic derivatives, free boundary problems, and stochastic control.