Model-independent Bounds for Option Prices: A Mass Transport Approach

Mathias Beiglb\"ock, Pierre Henry-Labord\`ere and Friedrich Penkner

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Abstract: In this paper we investigate model-independent bounds for exotic options written on a risky asset. 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.

Date: 2011-06, Revised 2013-02
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