Model-Independent Bounds for Asian Options: A Dynamic Programming Approach
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Publication:4591237
DOI10.1137/16M1087527zbMATH Open1415.91280arXiv1507.02651OpenAlexW2963969522MaRDI QIDQ4591237FDOQ4591237
Authors: Sigrid Källblad, Alexander Matthew Gordon Cox 
Publication date: 13 November 2017
Published in: SIAM Journal on Control and Optimization (Search for Journal in Brave)
Abstract: We consider the problem of finding model-independent bounds on the price of an Asian option, when the call prices at the maturity date of the option are known. Our methods differ from most approaches to model-independent pricing in that we consider the problem as a dynamic programming problem, where the controlled process is the conditional distribution of the asset at the maturity date. By formulating the problem in this manner, we are able to determine the model-independent price through a PDE formulation. Notably, this approach does not require specific constraints on the payoff function (e.g. convexity), and would appear to generalise to many related problems.
Full work available at URL: https://arxiv.org/abs/1507.02651
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Derivative securities (option pricing, hedging, etc.) (91G20) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) Dynamic programming (90C39) Generalizations of martingales (60G48)
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Cited In (7)
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- Controlled measure-valued martingales: a viscosity solution approach
- Distribution‐constrained optimal stopping
- Robust pricing and hedging around the globe
- Transport plans with domain constraints
- A dynamic programming approach to distribution-constrained optimal stopping
- CONSISTENT UPPER PRICE BOUNDS FOR EXOTIC OPTIONS
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