Download This PaperOn the Lower Arbitrage Bound of American Contingent Claims
13 Pages Posted: 27 May 2011
Date Written: March 2011
Abstract
We prove that in a discrete-time market model the lower arbitrage bound of an American contingent claim is itself an arbitrage-free price if and only if it corresponds to the price of the claim optimally exercised under some equivalent martingale measure.
Keywords: American contingent claim, arbitrage-free price, Snell envelope
JEL Classification: C02, G12
Suggested Citation: Suggested Citation
Acciaio, Beatrice and Svindland, Gregor, On the Lower Arbitrage Bound of American Contingent Claims (March 2011). Available at SSRN: https://ssrn.com/abstract=1852323 or http://dx.doi.org/10.2139/ssrn.1852323
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