Model-independent bounds for option prices -- a mass transport approach

DOI10.1007/S00780-013-0205-8zbMATH Open1277.91162arXiv1106.5929OpenAlexW3122203059MaRDI QIDQ354188

Friedrich Penkner, Pierre Henry-Labordère, Mathias Beiglböck

Publication date: 18 July 2013

Published in: Finance and Stochastics (Search for Journal in Brave)

Abstract: In this paper we investigate model-independent bounds for exotic options written on a risky asset. Based on arguments from the theory of Monge-Kantorovich mass-transport we establish a dual version of the problem that has a natural financial interpretation in terms of semi-static hedging. In particular we prove that there is no duality gap.

Full work available at URL: https://arxiv.org/abs/1106.5929

zbMATH Keywords

minimaxdualitymodel-independent pricinglower semi-continuouitymartingale transport planMonge-Kantorovich transport problemoption arbitragesemi-static subhedging

Mathematics Subject Classification ID

Special problems of linear programming (transportation, multi-index, data envelopment analysis, etc.) (90C08) Variational problems in a geometric measure-theoretic setting (49Q20) Financial applications of other theories (91G80) Derivative securities (option pricing, hedging, etc.) (91G20)

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