Approximation for Option Prices under Uncertain Volatility

Source abstract

In this paper, we study the asymptotic behavior of the worst case scenario option prices as the volatility interval in an uncertain volatility model (UVM) degenerates to a single point and then provide an approximation procedure for the worst case scenario prices in a UVM with a small volatility interval. Numerical experiments show that this approximation procedure performs well even when the size of the volatility band is not so small.