On the Lower Arbitrage Bound of American Contingent Claims
13 Pages Posted: 27 May 2011
Date Written: March 2011
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