Discrete, Non Probabilistic Market Models. Arbitrage and Pricing Intervals

Sebastian E. Ferrando, Alfredo L. Gonzalez, Ivan L. Degano and Massoome Rahsepar

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Abstract: The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a generalization that allows a limited notion of arbitrage in the market while still providing coherent option prices. Several properties of the price bounds are obtained, in particular a connection with risk neutral pricing is established for trajectory markets associated to a continuous-time martingale model.

Date: 2014-07, Revised 2015-11
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Citations: View citations in EconPapers (1)

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