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Model-Independent Pricing of Asian Options via Optimal Martingale Transport

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  • Florian Stebegg

Abstract

In this article we discuss the problem of calculating optimal model-independent (robust) bounds for the price of Asian options with discrete and continuous averaging. We will give geometric characterisations of the maximising and the minimising pricing model for certain types of Asian options in discrete and continuous time. In discrete time the problem is reduced to finding the optimal martingale transport for the cost function $|x+y|$. In the continuous time case we consider the cases with one and two given marginals. We describe the maximising models in both of these cases as well as the minimising model in the one-marginal case and relate the two-marginals case to the discrete time problem with two marginals.

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  • Florian Stebegg, 2014. "Model-Independent Pricing of Asian Options via Optimal Martingale Transport," Papers 1412.1429, arXiv.org.
    • Handle: RePEc:arx:papers:1412.1429
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    Cited by:

    1. Mathias Beiglbock & Marcel Nutz & Nizar Touzi, 2015. "Complete Duality for Martingale Optimal Transport on the Line," Papers 1507.00671, arXiv.org, revised Jun 2016.
    2. Sebastian Herrmann & Johannes Muhle-Karbe & Frank Thomas Seifried, 2016. "Hedging with Small Uncertainty Aversion," Papers 1605.06429, arXiv.org.
    3. David Hobson & Dominykas Norgilas, 2019. "Robust bounds for the American put," Finance and Stochastics, Springer, vol. 23(2), pages 359-395, April.
    4. Marcel Nutz & Florian Stebegg & Xiaowei Tan, 2017. "Multiperiod Martingale Transport," Papers 1703.10588, arXiv.org, revised May 2019.
    5. Huesmann, Martin & Stebegg, Florian, 2018. "Monotonicity preserving transformations of MOT and SEP," Stochastic Processes and their Applications, Elsevier, vol. 128(4), pages 1114-1134.
    6. Nutz, Marcel & Stebegg, Florian & Tan, Xiaowei, 2020. "Multiperiod martingale transport," Stochastic Processes and their Applications, Elsevier, vol. 130(3), pages 1568-1615.
    7. Sebastian Herrmann & Johannes Muhle-Karbe & Frank Thomas Seifried, 2017. "Hedging with small uncertainty aversion," Finance and Stochastics, Springer, vol. 21(1), pages 1-64, January.
    8. Alexander M. G. Cox & Sigrid Kallblad, 2015. "Model-independent bounds for Asian options: a dynamic programming approach," Papers 1507.02651, arXiv.org, revised Jul 2016.
    9. Marcel Nutz & Florian Stebegg, 2016. "Canonical Supermartingale Couplings," Papers 1609.02867, arXiv.org, revised Nov 2017.

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