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Approximations and asymptotics of upper hedging prices in multinomial models

  • Ryuichi Nakajima
  • Masayuki Kumon
  • Akimichi Takemura
  • Kei Takeuchi
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    We give an exposition and numerical studies of upper hedging prices in multinomial models from the viewpoint of linear programming and the game-theoretic probability of Shafer and Vovk. We also show that, as the number of rounds goes to infinity, the upper hedging price of a European option converges to the solution of the Black-Scholes-Barenblatt equation.

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    Paper provided by in its series Papers with number 1007.4372.

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    Date of creation: Jul 2010
    Date of revision: Jun 2011
    Publication status: Published in Japan Journal of Industrial and Applied Mathematics 25 (2012) 1-21
    Handle: RePEc:arx:papers:1007.4372
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