Seminar
Model independent bounds for option pricing: a stochastic control aproach
Nizar Touzi (Ecole Polytechnique)
Fédération des Banques Françaises Seminar
TSE, November 15, 2010, 12:30–14:00, room MF 323
Reference
Nizar Touzi (Ecole Polytechnique), “Model independent bounds for option pricing: a stochastic control aproach”, Fédération des Banques Françaises Seminar, TSE, November 15, 2010, 12:30–14:00, room MF 323.
Abstract
We develop a stochastic control approach for the derivation of model independent bounds for derivatives under various calibration constraints. Unlike the previous literature, our formulation seeks the optimal no arbitrage bounds given the knowledge of the distribution at some (or various) point in time. This problem is converted into a classical stochastic control problem by means of convex duality. We obtain a general characterization, and provide explicit optimal bounds in some examples.