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Finance and Stochastics

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26-11-2018

Minimax theorems for American options without time-consistency

Authors: Denis Belomestny, Tobias Hübner, Volker Krätschmer, Sascha Nolte

Published in: Finance and Stochastics | Issue 1/2019

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Abstract

In this paper, we give sufficient conditions guaranteeing the validity of the well-known minimax theorem for the lower Snell envelope. Such minimax results play an important role in the characterisation of arbitrage-free prices of American contingent claims in incomplete markets. Our conditions do not rely on the notions of stability under pasting or time-consistency and reveal some unexpected connection between the minimax result and path properties of the corresponding process of densities. We exemplify our general results in the case of families of measures corresponding to diffusion exponential martingales.

previous article A paradox in time-consistency in the mean–variance problem?

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Title: Minimax theorems for American options without time-consistency
Authors: Denis Belomestny
Tobias Hübner
Volker Krätschmer
Sascha Nolte
Publication date: 26-11-2018
Publisher: Springer Berlin Heidelberg
Published in: Finance and Stochastics / Issue 1/2019
Print ISSN: 0949-2984
Electronic ISSN: 1432-1122
DOI: https://doi.org/10.1007/s00780-018-0378-2

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