Model-Free Price Bounds Under Dynamic Option Trading
Ariel Neufeld, Julian Sester
Source abstract
In this paper we extend discrete time semistatic trading strategies by also allowing for dynamic trading in a finite amount of options, and we study the consequences for the model-independent superreplication prices of exotic derivatives. These include duality results as well as a precise characterization of pricing rules for the dynamically tradable options triggering an improvement of the price bounds for exotic derivatives in comparison with the conventional price bounds obtained through the martingale optimal transport approach.
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