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ON THE LOWER ARBITRAGE BOUND OF AMERICAN CONTINGENT CLAIMS
Author(s) -
Acciaio Beatrice,
Svindland Gregor
Publication year - 2014
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/j.1467-9965.2012.00519.x
Subject(s) - arbitrage , martingale (probability theory) , economics , mathematical economics , index arbitrage , upper and lower bounds , financial economics , measure (data warehouse) , fundamental theorem of asset pricing , econometrics , risk arbitrage , arbitrage pricing theory , mathematics , capital asset pricing model , computer science , mathematical analysis , database
We prove that in a discrete‐time market model the lower arbitrage bound of an American contingent claim is itself an arbitrage‐free price if and only if it corresponds to the price of the claim optimally exercised under some equivalent martingale measure.