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

Mathias Beiglböck (), Pierre Henry-Labordère () and Friedrich Penkner ()

Finance and Stochastics, 2013, vol. 17, issue 3, 477-501

Abstract: In this paper we investigate model-independent bounds for exotic options written on a risky asset using infinite-dimensional linear programming methods. 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. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Model-independent pricing; Monge–Kantorovich transport problem; Option arbitrage; Robust superreplication theorem; 91G20; 91G80; C61; G13 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (153)

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DOI: 10.1007/s00780-013-0205-8

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