On certain exponential regularity for Gaussian processes

DOI10.1007/S10687-007-0031-5MaRDI QIDQ2463673zbMATH OpenOpenAlexFDO

Authors Christer Borell

Publication date 16 December 2007

Published in Extremes (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s10687-007-0031-5

zbMATH Keywords

Bachelier modelBlack-Scholes modelinequalityoption price

Mathematics Subject Classification ID

Inequalities; stochastic orderings (60E15) Gaussian processes (60G15)

Review text

Let \(X=(X_j, j=1,\dots,m)\) be a zero-mean Gaussian vector with \(\sigma_j=\sqrt{E\;X_j^2}\). If \(f:\mathbb R^n\to \mathbb R\) is a Borel function, nondecreasing in each variable separately, and \[ f(x_1+s,\dots,x_m+s)\leq f(x_1,\dots,x_m)+s\;\forall x_i,\;\forall s>0, \] then \[ \exp\left[ -{\sigma_{\max}^2\over 2}+E(f(X)) \right] \leq E\left[ \exp\left( f(X_1-\sigma_1^2/2,\dots , X_m-\sigma_m^2/2) \right) \right] \leq\exp(E(f(X))). \] Based on these inequalities, the author derives lower and upper bounds for the ratio of option prices in Black-Scholes and Bachelier models.

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Cites work

• A Geometric Approach to Maximum Likelihood Estimation for Infinite- Dimensional Gaussian Location. II
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• scientific article; zbMATH DE number 158461 (Why is no real title available?)
• scientific article; zbMATH DE number 1342370 (Why is no real title available?)
• Markov Processes, Gaussian Processes, and Local Times
• The mathematics of arbitrage
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Cited in

(5)

• On an exponential functional for Gaussian processes and its geometric foundations
• scientific article; zbMATH DE number 3928001 (Why is no real title available?)
• scientific article; zbMATH DE number 2149890 (Why is no real title available?)
• Universal bounds and monotonicity properties of ratios of Hermite and parabolic cylinder functions
• The Wills functional for Poisson processes

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