Improved Fréchet-Hoeffding bounds on \(d\)-copulas and applications in model-free finance (Q1704147): Difference between revisions

The paper deals with the partial point-wise ordering of certain families of Lipschitz functions defined of the unit cube \([0,1]^d\), \(d \geq 2\), and taking values in the unit interval \([0,1]\), namely \(d\)-dimensional copulas and their generalizations quasi-copulas. The goal is to determine the point-wise bounds for constrained sets of such functions. Between others the authors provided the formulas for the upper and lower bounds for sets of quasi-copulas and copulas with fixed values on some closed subset of the unit cube. As a possible application of the obtained results they derive the bounds on prices of certain European style exotic options written on several basic assets, under the dependence uncertainty.