Robust bounds for the American Put
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 E...
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Zusammenfassung: | 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 and an associated exercise time, for which
the price of the American put is maximal. Moreover we derive a cheapest
superhedge. The model associated with the highest price of the American put is
constructed from the left-curtain martingale transport of Beiglb\"{o}ck and
Juillet. |
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DOI: | 10.48550/arxiv.1711.06466 |