Show simple item record

dc.contributor.authorJouini, Elyès
HAL ID: 6654
dc.contributor.authorChazal, Marie
dc.date.accessioned2008-10-08T10:53:07Z
dc.date.available2008-10-08T10:53:07Z
dc.date.issued2008
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/30
dc.descriptionLe fichier attaché est une version également éditée dans les Cahiers de la Chaire "Les Particuliers face aux Risques" de l'Institut de Finance de Dauphine, cahier n° 21, mai 2008
dc.language.isoenen
dc.subjectConic dualityen
dc.subjectSemi-infinite programmingen
dc.subjectOption boundsen
dc.subjectEquilibrium pricesen
dc.subject.ddc332en
dc.subject.classificationjelD50
dc.titleEquilibrium Pricing Bound on Option Pricesen
dc.typeArticle accepté pour publication ou publiéen
dc.description.abstractenWe consider the problem of valuing European options in a complete market but with incomplete data. Typically, when the underlying asset dynamics is not specified, the martingale probability measure is unknown. Given a consensus on the actual distribution of the underlying price at maturity, we derive an upper bound on the call option price by putting two kind of restrictions on the pricing probability measure. First, we put a restriction on the second risk-neutral moment of the underlying asset terminal value. Second, from equilibrium pricing arguments one can put a monotonicity restriction on the Radon-Nikodym density of the pricing probability with respect to the true probability measure. This density is restricted to be a nonincreasing function of the underlying price at maturity. The bound appears then as the solution of a constrained optimization problem and we adopt a duality approach to solve it. We obtain a weak sufficient condition for strong duality and existence for the dual problem to hold, for options defined by general payoff functions. Explicit bounds are provided for the call option. Finally, we provide a numerical example.en
dc.relation.isversionofjnlnameMathematics and Financial Economicsen
dc.relation.isversionofjnlvol1en
dc.relation.isversionofjnlissue3-4en
dc.relation.isversionofjnldate2008-06en
dc.relation.isversionofjnlpages251-281en
dc.relation.isversionofdoihttp://dx.doi.org/10.1007/s11579-008-0010-xen
dc.relation.isversionofjnlpublisherSpringeren
dc.subject.ddclabelEconomie financière


Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record