Is the minimum value of an option on variance generated by local volatility?

DOI10.1137/100800166zbMATH Open1214.91145arXiv1001.4031OpenAlexW2018890045MaRDI QIDQ2996523FDOQ2996523

Authors: Mathias Beiglböck, Peter Friz, Stephan Sturm 

Publication date: 2 May 2011

Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Abstract: We discuss the possibility of obtaining model-free bounds on volatility derivatives, given present market data in the form of a calibrated local volatility model. A counter-example to a wide-spread conjecture is given.

Full work available at URL: https://arxiv.org/abs/1001.4031

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zbMATH Keywords

local volatilityDupire's formula

Mathematics Subject Classification ID

Financial applications of other theories (91G80)

Cited In (2)

• A model-free no-arbitrage price bound for variance options
• Short Communication: Inversion of Convex Ordering: Local Volatility Does Not Maximize the Price of VIX Futures

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