Approximations and asymptotics of upper hedging prices in multinomial models

Details Approximations and asymptotics of upper hedging prices in multinomial models Approximations and asymptotics of upper hedging prices in multinomial models

2010-07-26

arxiv.org/abs/1007.4372v2

Japan Journal of Industrial and Applied Mathematics 25 (2012) 1-21

Economy

Quantitative Finance

Pricing of Securities

Scientific paper

We give an exposition and numerical studies of upper hedging prices in
multinomial models from the viewpoint of linear programming and the
game-theoretic probability of Shafer and Vovk. We also show that, as the number
of rounds goes to infinity, the upper hedging price of a European option
converges to the solution of the Black-Scholes-Barenblatt equation.

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