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Robust upper bounds for American put options
Author(s) -
Du Ye,
Xue Shan,
Liu Yanchu
Publication year - 2019
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21961
Subject(s) - cover (algebra) , upper and lower bounds , mathematical economics , valuation of options , black–scholes model , mathematical optimization , computer science , economics , econometrics , mathematics , engineering , mechanical engineering , volatility (finance) , mathematical analysis
In this paper, we develop robust and model‐free upper bounds for American put option prices. Our bounds have all of those appealing features of the upper bounds for European options provided in DeMarzo et al. (2016, Robust option pricing: Hannan and Blackwell meet Black and Scholes, Journal of Economic Theory, 410‐434) but cover more popular derivatives in practice. Numerical and empirical investigations illustrate the performance of our method.