Mostafa Mousavi — PSTAT-UCSB 

Title: Delay in Financial Markets

Abstract: All participants in financial markets face two types of delay. First, the delay in execution that is when the order is made but it would be executed with some delay. Second, the delay in receiving information, that is the price is observed with some delay. In both cases the executed orders are made based on the information available some time before the execution time. Delay adds more uncertainty to the market and it is of great importance to study it. In this talk, delay is discussed in the framework of binomial model. The notion of no arbitrage is investigated in this setting. Then, due to the incompleteness of the market, super (-sub)-hedging strategies are studied. For a convex payoff function, an explicit super-replication pricing formula is derived.