Option Bounds with Finite Revision Opportunities
This article generalizes the single-period linear programming option bound prices by allowing for a finite nu mber of revision opportunities. It is shown that, in an incomplete ma rket, the bounds on option prices can be derived using a modified bin omial option pricing model. Tighter bounds are developed under more r estrictive assumptions on probabilities and risk aversion. For this c ase, the upper bounds are shown to coincide with the upper bounds der ived by S. Perrakis, while the lower bounds are shown to be tighter. Copyright 1988 by American Finance Association.
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Volume (Year): 43 (1988)
Issue (Month): 2 (June)
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