Alternative Methods for Determining Option Bounds: A Review and Comparison

Cheng Few Lee, Zhaodong Zhong, Tzu Tai and Hongwei Chuang

Chapter 24 in Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning:(In 4 Volumes), 2020, pp 917-945 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper first reviews alternative methods for determining option bounds. This method includes Stochastic dominance, linear programming, semi-parametric method, and non-parametric method for European option. Then option bounds for American and Asian options are discussed. Finally, we discuss empirical applications in equities and equity indices, index futures, foreign exchange rates, and real options.

Keywords: Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data (search for similar items in EconPapers)
JEL-codes: C01 C1 G32 (search for similar items in EconPapers)
Date: 2020
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Chapter: Alternative Methods for Determining Option Bounds: A Review and Comparison (2024)
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