Revisiting Semidefinite Programming Approaches to Options Pricing: Complexity and Computational Perspectives

DOI10.1287/IJOC.2022.1220arXiv2111.07701MaRDI QIDQ6203369FDOQ6203369

Authors:

Publication date: 28 February 2024

Published in: INFORMS Journal on Computing (Search for Journal in Brave)

Abstract: In this paper we consider the problem of finding bounds on the prices of options depending on multiple assets without assuming any underlying model on the price dynamics, but only the absence of arbitrage opportunities. We formulate this as a generalized moment problem and utilize the well-known Moment-Sum-of-Squares (SOS) hierarchy of Lasserre to obtain bounds on the range of the possible prices. A complementary approach (also due to Lasserre) is employed for comparison. We present several numerical examples to demonstrate the viability of our approach. The framework we consider makes it possible to incorporate different kinds of observable data, such as moment information, as well as observable prices of options on the assets of interest.

Full work available at URL: https://arxiv.org/abs/2111.07701

Recommendations

• scientific article; zbMATH DE number 2190117
• SDP relaxation of arbitrage pricing bounds based on option prices and moments
• Bounding Option Prices by Semidefinite Programming: A Cutting Plane Algorithm
• Semidefinite programming approaches for bounding Asian option prices
• PRICING A CLASS OF EXOTIC OPTIONS VIA MOMENTS AND SDP RELAXATIONS

zbMATH Keywords

semidefinite programmingoptions pricingmoment-SOS hierarchy

Mathematics Subject Classification ID

Mathematical programming (90Cxx)

Cited In (1)

• Tighter bounds on transient moments of stochastic chemical systems

This page was built for publication: Revisiting Semidefinite Programming Approaches to Options Pricing: Complexity and Computational Perspectives

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6203369)