2024/06/14 by Linn Engström, Engström, Linn, Sigrid Källblad +3
Economics, Econometrics and Finance · #49M29 #60G42 #90C08 #91G20 #Computational Finance (q-fin.CP) #FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Optimization and Control (math.OC) #Probability (math.PR) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2406.09959
openalex publication_date 2024/06/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
We introduce an efficient computational framework for solving a class of multi-marginal martingale optimal transport problems, which includes many robust pricing problems of large financial interest. Such problems are typically computationally challenging due to the martingale constraint, however, by extending the state space we can identify them with problems that exhibit a certain sequential martingale structure. Our method exploits such structures in combination with entropic regularisation, enabling fast computation of optimal solutions and allowing us to solve problems with a large number of marginals. We demonstrate the method by using it for computing robust price bounds for different options, such as lookback options and Asian options.