TY - JOUR
T1 - Hedging Game Contingent Claims with Constrained Portfolios
AU - Wang , Lei
AU - Xiao , Yan
JO - Advances in Applied Mathematics and Mechanics
VL - 4
SP - 529
EP - 545
PY - 2009
DA - 2009/01
SN - 1
DO - http://doi.org/10.4208/aamm.09-m08h8
UR - https://global-sci.org/intro/article_detail/aamm/8384.html
KW - Game option, contingent claims, hedging, optimal stopping, free boundary.
AB - <p style="text-align: justify;">Game option is an American-type option with added feature that the
writer can exercise the option at any time before maturity. In this
paper, we consider the problem of hedging Game Contingent Claims
(GCC) in two cases. For the case that portfolio is unconstrained, we
provide a single arbitrage-free price $P_0$. Whereas for the
constrained case, the price is replaced by an interval
$[h_{low},h_{up}]$ of arbitrage-free prices. And for the portfolio
with some closed constraints, we give the expressions of the
upper-hedging price and lower-hedging price. Finally, for a special
type of game option, we provide explicit expressions of the price
and optimal portfolio for the writer and holder.</p>