IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v23y2020i03ns0219024920500156.html
   My bibliography  Save this article

Robust Bounds For Derivative Prices In Markovian Models

Author

Listed:
  • JULIAN SESTER

    (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.

Suggested Citation

  • Julian Sester, 2020. "Robust Bounds For Derivative Prices In Markovian Models," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 23(03), pages 1-39, May.
    • Handle: RePEc:wsi:ijtafx:v:23:y:2020:i:03:n:s0219024920500156
    DOI: 10.1142/S0219024920500156
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024920500156
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024920500156?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jonathan Ansari & Eva Lutkebohmert & Ariel Neufeld & Julian Sester, 2022. "Improved Robust Price Bounds for Multi-Asset Derivatives under Market-Implied Dependence Information," Papers 2204.01071, arXiv.org, revised Sep 2023.
    2. Julian Sester, 2023. "On intermediate Marginals in Martingale Optimal Transportation," Papers 2307.09710, arXiv.org, revised Nov 2023.
    3. Ariel Neufeld & Julian Sester, 2021. "Model-free price bounds under dynamic option trading," Papers 2101.01024, arXiv.org, revised Jul 2021.
    4. Ariel Neufeld & Julian Sester, 2021. "A deep learning approach to data-driven model-free pricing and to martingale optimal transport," Papers 2103.11435, arXiv.org, revised Dec 2022.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:23:y:2020:i:03:n:s0219024920500156. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.