English

Robust bounds for the American Put

Mathematical Finance 2018-05-23 v2

Abstract

We consider the problem of finding a model-free upper bound on the price of an American put given the prices of a family of European puts on the same underlying asset. Specifically we assume that the American put must be exercised at either T1T_1 or T2T_2 and that we know the prices of all vanilla European puts with these maturities. In this setting we find a model which is consistent with European put prices and an associated exercise time, for which the price of the American put is maximal. Moreover we derive a cheapest superhedge. The model associated with the highest price of the American put is constructed from the left-curtain martingale transport of Beiglb\"{o}ck and Juillet.

Keywords

Cite

@article{arxiv.1711.06466,
  title  = {Robust bounds for the American Put},
  author = {David Hobson and Dominykas Norgilas},
  journal= {arXiv preprint arXiv:1711.06466},
  year   = {2018}
}

Comments

31 pages, 14 figures

R2 v1 2026-06-22T22:49:09.807Z