arXiv Open Access 2021

Pricing multi-asset contingent claims in a multi-dimensional binomial market

Jarek Kędra Assaf Libman Victoria Steblovskaya

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Abstrak

We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows for closed form formulas for the bounds of a no-arbitrage contingent claim price interval. We construct a feasible algorithm for computing those boundaries as well as for the corresponding hedging strategies. Our results apply, for example, to European basket call and put options and Asian arithmetic average options.

Topik & Kata Kunci

q-fin.MF math.OC math.PR q-fin.PR

Penulis (3)

Jarek Kędra

Assaf Libman

Victoria Steblovskaya

Format Sitasi

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Kędra, J., Libman, A., Steblovskaya, V. (2021). Pricing multi-asset contingent claims in a multi-dimensional binomial market. https://arxiv.org/abs/2106.13283

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Informasi Jurnal

Tahun Terbit: 2021
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓