Improved Frechet bounds and model-free pricing of multi-asset options

P. Tankov (1)

1 LPMA - Laboratoire de Probabilités et Modèles Aléatoires

Improved bounds on the copula of a bivariate random vector are computed when partial information is available, such as the values of the copula on a given subset of [0, 1](2), or the value of a functional of the copula, monotone with respect to the concordance order. These results are then used to compute model-free bounds on the prices of two-asset options which make use of extra information about the dependence structure, such as the price of another two-asset option.

Domaines: Probabilités [math.PR]

P. Tankov. Improved Frechet bounds and model-free pricing of multi-asset options. Journal of Applied Probability, 2011, 48 (2), pp.389-403. ⟨10.1239/jap/1308662634⟩. ⟨hal-00705975⟩