Improved robust price bounds for multi-asset derivatives under market-implied dependence information

Jonathan Ansari (), Eva Lütkebohmert, Ariel Neufeld () and Julian Sester ()
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Jonathan Ansari: University of Freiburg
Ariel Neufeld: NTU Singapore
Julian Sester: National University of Singapore

Finance and Stochastics, 2024, vol. 28, issue 4, No 1, 964 pages

Abstract: Abstract We show how inter-asset dependence information derived from market prices of options can lead to improved model-free price bounds for multi-asset derivatives. Depending on the type of the traded option, we either extract correlation information or derive restrictions on the set of admissible copulas that capture the inter-asset dependences. To compute the resulting price bounds for some multi-asset options of interest, we apply a modified martingale optimal transport approach. Several examples based on simulated and real market data illustrate the improvement of the obtained price bounds and thus provide evidence for the relevance and tractability of our approach.

Keywords: Multi-asset options; Model-free pricing; Quasi-copulas; Correlation; Dependence information; 91G20; 91G80; 60E15 (search for similar items in EconPapers)
JEL-codes: C61 G11 G13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00780-024-00539-z

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