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| Content Provider | Springer Nature Link |
|---|---|
| Author | Obłój, Jan Cox, Alexander M. G. |
| Copyright Year | 2011 |
| Abstract | Double no-touch options are contracts which pay out a fixed amount provided an underlying asset remains within a given interval. In this work, we establish model-independent bounds on the price of these options based on the prices of more liquidly traded options (call and digital call options). Key steps are the construction of super- and sub-hedging strategies to establish the bounds, and the use of Skorokhod embedding techniques to show the bounds are the best possible.In addition to establishing rigorous bounds, we consider carefully what is meant by arbitrage in settings where there is no a priori known probability measure. We discuss two natural extensions of the notion of arbitrage, weak arbitrage and weak free lunch with vanishing risk, which are needed to establish equivalence between the lack of arbitrage and the existence of a market model. |
| Ending Page | 605 |
| Page Count | 33 |
| Starting Page | 573 |
| File Format | |
| ISSN | 09492984 |
| e-ISSN | 14321122 |
| Journal | Finance and Stochastics |
| Issue Number | 3 |
| Volume Number | 15 |
| Language | English |
| Publisher | Springer-Verlag |
| Publisher Date | 2011-03-17 |
| Publisher Place | Berlin, Heidelberg |
| Access Restriction | One Nation One Subscription (ONOS) |
| Subject Keyword | Weak arbitrage Finance/Investment/Banking Probability Theory and Stochastic Processes Quantitative Finance Weak free lunch with vanishing risk Statistics for Business/Economics/Mathematical Finance/Insurance Robust pricing and hedging Skorokhod embedding problem Double no-touch option Economic Theory Stopping times; optimal stopping problems; gambling theory Model-independent arbitrage Martingales with continuous parameter |
| Content Type | Text |
| Resource Type | Article |
| Subject | Finance Statistics and Probability Statistics, Probability and Uncertainty |
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