Discrete, Non Probabilistic Market Models. Arbitrage and Pricing Intervals

Discrete, Non Probabilistic Market Models. Arbitrage and Pricing Intervals

The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a generalization that allows a limited notion of arbitrage in th...

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Hauptverfasser: Ferrando, Sebastian E, Gonzalez, Alfredo L, Degano, Ivan L, Rahsepar, Massoome
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Quantitative Finance - Mathematical Finance
Quantitative Finance - Pricing of Securities
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creator Ferrando, Sebastian E
Gonzalez, Alfredo L
Degano, Ivan L
Rahsepar, Massoome
description The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a generalization that allows a limited notion of arbitrage in the market while still providing coherent option prices. Several properties of the price bounds are obtained, in particular a connection with risk neutral pricing is established for trajectory markets associated to a continuous-time martingale model.
doi_str_mv 10.48550/arxiv.1407.1769
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Quantitative Finance - Pricing of Securities
title Discrete, Non Probabilistic Market Models. Arbitrage and Pricing Intervals
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