Alternative Methods for Determining Option Bounds: A Review and Comparison

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

Chapter 27 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 893-921 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter 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 Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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Chapter: Alternative Methods for Determining Option Bounds: A Review and Comparison (2020)
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