Journal
FINANCE AND STOCHASTICS
Volume 17, Issue 3, Pages 477-501Publisher
SPRINGER HEIDELBERG
DOI: 10.1007/s00780-013-0205-8
Keywords
Model-independent pricing; Monge-Kantorovich transport problem; Option arbitrage; Robust superreplication theorem
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Funding
- FWF [P21209]
- ERC [247033]
- Austrian Science Fund (FWF) [P 21209] Funding Source: researchfish
- European Research Council (ERC) [247033] Funding Source: European Research Council (ERC)
- Austrian Science Fund (FWF) [P21209] Funding Source: Austrian Science Fund (FWF)
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In this paper we investigate model-independent bounds for exotic options written on a risky asset using infinite-dimensional linear programming methods. Based on arguments from the theory of Monge-Kantorovich mass transport, we establish a dual version of the problem that has a natural financial interpretation in terms of semi-static hedging. In particular we prove that there is no duality gap.
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