ROBUST BOUNDS FOR DERIVATIVE PRICES IN MARKOVIAN MODELS

Author:

SESTER JULIAN1ORCID

Affiliation:

1. Department of Quantitative Finance, Institute for Economics, University of Freiburg, Platz der Alten Synagoge 1, 79098 Freiburg, Germany

Abstract

We study the optimal martingale transport problem under an additional constraint imposing the underlying process to be Markovian. This formulation results in a modified transportation problem in which the solutions correspond to robust price bounds for exotic derivatives within the class of calibrated martingale models exhibiting the Markov property. We investigate the arising consequences which comprise a dual perspective of the transport problem in terms of liquid replication strategies. Eventually an empirical investigation illustrates the influence of the Markov property on robust price bounds for financial derivatives.

Funder

Carl-Zeiss-Stiftung

Publisher

World Scientific Pub Co Pte Lt

Subject

General Economics, Econometrics and Finance,Finance

Cited by 5 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. On intermediate marginals in martingale optimal transportation;Mathematics and Financial Economics;2023-11-07

2. A Deep Learning Approach to Data-Driven Model-Free Pricing and to Martingale Optimal Transport;IEEE Transactions on Information Theory;2023-05

3. Model-Free Price Bounds Under Dynamic Option Trading;SIAM Journal on Financial Mathematics;2021-01

4. Model-free price bounds under dynamic option trading;SSRN Electronic Journal;2021

5. Robust statistical arbitrage strategies;Quantitative Finance;2020-10-30

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