Related papers: Quantum Bounds for Option Prices
We consider the problem of computing upper and lower bounds on the price of a European basket call option, given prices on other similar baskets. Although this problem is very hard to solve exactly in the general case, we show that in some…
In this paper we consider the problem of finding bounds on the prices of options depending on multiple assets without assuming any underlying model on the price dynamics, but only the absence of arbitrage opportunities. We formulate this as…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
We consider the problem of finding a consistent upper price bound for exotic options whose payoff depends on the stock price at two different predetermined time points (e.g. Asian option), given a finite number of observed call prices for…
Using neural networks, we compute bounds on the prices of multi-asset derivatives given information on prices of related payoffs. As a main example, we focus on European basket options and include information on the prices of other similar…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
In this note we discuss - in what is intended to be a pedagogical fashion - FX option pricing in target zones with attainable boundaries. The boundaries must be reflecting. The no-arbitrage requirement implies that the differential (foreign…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…
The relationship between expectation and price is commonly established with two principles: no-arbitrage, which asserts that both maps are positive; and equivalence, which asserts that the maps share the same null events. Constructed from…
In the context of dealing with financial risk management problems it is desirable to have accurate bounds for option prices in situations when pricing formulae do not exist in the closed form. A unified approach for obtaining upper and…
Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…
Options are financial instruments that depend on the underlying stock. We explain their non-Gaussian fluctuations using the nonextensive thermodynamics parameter $q$. A generalized form of the Black-Scholes (B-S) partial differential…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
We consider a discrete-time incomplete multi-asset market model with continuous price jumps. For a wide class of contingent claims, including European basket call options, we compute the bounds of the interval containing the no-arbitrage…
This study addresses the interpretable estimation of price bounds in the context of price optimization. In recent years, price-optimization methods have become indispensable for maximizing revenue and profits. However, effective application…
We consider the computation of model-free bounds for multi-asset options in a setting that combines dependence uncertainty with additional information on the dependence structure. More specifically, we consider the setting where the…
Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…