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Robust bounds for the American put
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Hobson, David G. and Norgilas, Dominykas (2019) Robust bounds for the American put. Finance and Stochastics, 23 (2). pp. 359-395. doi:10.1007/s00780-019-00385-4 ISSN 0949-2984.
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Official URL: https://doi.org/10.1007/s00780-019-00385-4
Abstract
We consider the problem of finding a model-free upper bound on the price of an American put given the prices of a family of European puts on the same underlying asset. Specifically, we assume that the American put must be exercised at either $T_1$ or $T_2$ and that we know the prices of all vanilla European puts with these maturities. In this setting we find a model which is consistent with European put prices, together with an associated exercise time, for which the price of the American put is maximal. Moreover, we derive the cheapest superhedge. The model associated with the highest price of the American put is constructed from the left-curtain martingale coupling of Beiglb\"{o}ck and Juillet \cite{BeiglbockJuillet:16}.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HG Finance | ||||||||
Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||||||
Library of Congress Subject Headings (LCSH): | Options (Finance) -- Mathematical models, Derivative securities | ||||||||
Journal or Publication Title: | Finance and Stochastics | ||||||||
Publisher: | Springer | ||||||||
ISSN: | 0949-2984 | ||||||||
Official Date: | April 2019 | ||||||||
Dates: |
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Volume: | 23 | ||||||||
Number: | 2 | ||||||||
Page Range: | pp. 359-395 | ||||||||
DOI: | 10.1007/s00780-019-00385-4 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Reuse Statement (publisher, data, author rights): | This is a post-peer-review, pre-copyedit version of an article published in Finance and Stochastics. The final authenticated version is available online at: http://dx.doi.org/[insert DOI]”. | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 23 January 2019 | ||||||||
Date of first compliant Open Access: | 18 April 2019 | ||||||||
Related URLs: | |||||||||
Open Access Version: |
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