Download This PaperOn the Lower Arbitrage Bound of American Contingent Claims
9 Pages Posted: 13 Dec 2013
Date Written: January 2014
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
Suggested Citation: Suggested Citation
Acciaio, Beatrice and Svindland, Gregor, On the Lower Arbitrage Bound of American Contingent Claims (January 2014). Mathematical Finance, Vol. 24, Issue 1, pp. 147-155, 2014, Available at SSRN: https://ssrn.com/abstract=2367077 or http://dx.doi.org/10.1111/j.1467-9965.2012.00519.x
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