Superreplication in Stochastic Volatility Models and Optimal Stopping

In this paper we discuss the superreplication of derivatives in a stochastic volatility model under the additional assumption that the volatility follows a bounded process. We characterize the value process of our superhedging strategy by an optimal-stopping problem in the context of the Black-Scholes model which is similar to the optimal stopping problem that arises in the pricing of American-type derivatives. Our proof is based on probabilistic arguments. We study the minimality of these superhedging strategies and discuss PDE-characterizations of the value function of our superhedging strategy. We illustrate our approach by examples and simulations.