Approximations and asymptotics of upper hedging prices in multinomial models

Ryuichi Nakajima, Masayuki Kumon, Akimichi Takemura and Kei Takeuchi

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Abstract: We give an exposition and numerical studies of upper hedging prices in multinomial models from the viewpoint of linear programming and the game-theoretic probability of Shafer and Vovk. We also show that, as the number of rounds goes to infinity, the upper hedging price of a European option converges to the solution of the Black-Scholes-Barenblatt equation.

Date: 2010-07, Revised 2011-06
New Economics Papers: this item is included in nep-cmp
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Published in Japan Journal of Industrial and Applied Mathematics 25 (2012) 1-21

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1007.4372

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