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

2022/04/03 by Jonathan Ansari, Eva Lütkebohmert, Ansari, Jonathan +5 · 1 citation
Economics, Econometrics and Finance · #Capital Investment and Risk Analysis #Computational Finance (q-fin.CP) #FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Monetary Policy and Economic Impact #Pricing of Securities (q-fin.PR) #Probability (math.PR) #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.2204.01071

openalex publication_date 2022/04/03 · openalex created_date 2022/05/05 · openalex updated_date 2026/07/28

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.

Cited by

• Empirical Analysis of the Model-Free Valuation Approach: Hedging Gaps, Conservatism, and Trading Opportunities

Related

• Improved model-free bounds for multi-asset options using option-implied information and deep learning
• Model-free bounds for multi-asset options using option-implied information and their exact computation
• Bounds on Multi-asset Derivatives via Neural Networks
• Improved Frechet bounds and model-free pricing of multi-asset options
• Robust pricing and hedging of options on multiple assets and its\n numerics