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Moment bounds for truncated random variables

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  • Liu, Guoqing
  • Li, Wenbo V.

Abstract

Given any random variable X[set membership, variant][0,M] with and fixed, various bounds are derived on the mean and variance of the truncated random variable max(0,X-K) with K>0 given. The results are motivated by questions associated with European call options. The techniques are based on domination by quadratic functions and change of measures in the unimodal distribution case.

Suggested Citation

  • Liu, Guoqing & Li, Wenbo V., 2009. "Moment bounds for truncated random variables," Statistics & Probability Letters, Elsevier, vol. 79(18), pages 1951-1956, September.
    • Handle: RePEc:eee:stapro:v:79:y:2009:i:18:p:1951-1956
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    References listed on IDEAS

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    1. Ioana Popescu, 2005. "A Semidefinite Programming Approach to Optimal-Moment Bounds for Convex Classes of Distributions," Mathematics of Operations Research, INFORMS, vol. 30(3), pages 632-657, August.
    2. Dimitris Bertsimas & Ioana Popescu, 2002. "On the Relation Between Option and Stock Prices: A Convex Optimization Approach," Operations Research, INFORMS, vol. 50(2), pages 358-374, April.
    3. Lo, Andrew W., 1987. "Semi-parametric upper bounds for option prices and expected payoffs," Journal of Financial Economics, Elsevier, vol. 19(2), pages 373-387, December.
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    Cited by:

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    2. Wong, Man Hong & Zhang, Shuzhong, 2014. "On distributional robust probability functions and their computations," European Journal of Operational Research, Elsevier, vol. 233(1), pages 23-33.

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