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Quantitative Finance > Mathematical Finance

arXiv:2204.01071 (q-fin)
[Submitted on 3 Apr 2022 (v1), last revised 24 Sep 2023 (this version, v2)]

Title:Improved Robust Price Bounds for Multi-Asset Derivatives under Market-Implied Dependence Information

Authors:Jonathan Ansari, Eva Lütkebohmert, Ariel Neufeld, Julian Sester
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Abstract:We show how inter-asset dependence information derived from market prices of options can lead to improved model-free price bounds for multi-asset derivatives. Depending on the type of the traded option, we either extract correlation information or we derive restrictions on the set of admissible copulas that capture the inter-asset dependencies. To compute the resultant price bounds for some multi-asset options of interest, we apply a modified martingale optimal transport approach. Several examples based on simulated and real market data illustrate the improvement of the obtained price bounds and thus provide evidence for the relevance and tractability of our approach.
Subjects: Mathematical Finance (q-fin.MF); Probability (math.PR); Computational Finance (q-fin.CP); Pricing of Securities (q-fin.PR)
Cite as: arXiv:2204.01071 [q-fin.MF]
  (or arXiv:2204.01071v2 [q-fin.MF] for this version)
  https://doi.org/10.48550/arXiv.2204.01071

Submission history

From: Ariel Neufeld [view email]
[v1] Sun, 3 Apr 2022 13:25:15 UTC (1,119 KB)
[v2] Sun, 24 Sep 2023 05:55:25 UTC (908 KB)
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