On superhedging under delta constraints

The superhedging problem of derivative securities under the constraint of portfolio amounts is revisited. This paper considers more general forms of constraints, characterizes the minimal superhedging cost using a 'dual' maximization problem, and shows that a replicating strategy of the so-called 'face-lifted' claim gives a minimal superhedging strategy in the European option case. Also, as hinted by the static-replication technique, a superhedging strategy is computed for a knockout option in closed form.