Comonotonic Asset Prices in Arbitrage-Free Markets

22 Pages Posted: 15 Mar 2018

See all articles by Jan Dhaene

Jan Dhaene

Katholieke Universiteit Leuven

Alexander Kukush

Catholic University of Leuven (KUL)

Daniël Linders

University of Illinois

Date Written: March 12, 2018

Abstract

For an arbitrage-free market with a single underlying asset, we investigate conditions under which the consecutive price levels are comonotonic. Furthermore, for an arbitrage-free market with n assets we investigate the consequences of assuming comonotonicity of the vector containing the price levels of each asset at a single future date T. Although being of a theoretical nature, the results of this paper give insight in the reachability of the comonotonic upper bounds for Asian options and for basket options that can be found in Simon et al. (2000), Dhaene et al. (2002b), Hobson et al. (2005) and Chen et al. (2008).

Keywords: Comonotonicity, arbitrage-free markets, Black & Scholes

JEL Classification: C2

Suggested Citation

Dhaene, Jan and Kukush, Alexander and Linders, Daniël, Comonotonic Asset Prices in Arbitrage-Free Markets (March 12, 2018). Available at SSRN: https://ssrn.com/abstract=3138965 or http://dx.doi.org/10.2139/ssrn.3138965

Jan Dhaene

Katholieke Universiteit Leuven ( email )

Naamsestraat 69
Leuven, 3000
Belgium

Alexander Kukush

Catholic University of Leuven (KUL) ( email )

Leuven, B-3000
Belgium

Daniël Linders (Contact Author)

University of Illinois ( email )

306 Altgeld Hall,
1409 West Green Street
Champaign, IL 61822
United States

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