On Intermediate Marginals in Martingale Optimal Transportation

18 Pages Posted: 12 May 2020

See all articles by Julian Sester

Julian Sester

Nanyang Technological University (NTU) - School of Physical and Mathematical Sciences; University of Freiburg

Date Written: April 19, 2020

Abstract

We study the influence of information about call option prices on model-independent price bounds for exotic derivatives obtained through martingale transport. The considered call option prices and their associated marginal distributions do not correspond to some future maturity on which the payoff of the exotic derivative depends. In this case, we characterize marginals that indicate improved price bounds as well as those that exclude any improvement. Eventually we show in numerous examples that the consideration of additional price information on vanilla options may have a considerable impact on the resultant model-independent price bounds.

Keywords: Martingale optimal transport, Additional information, Robust price bounds, Intermediate marginals

JEL Classification: C61, G11, G13

Suggested Citation

Sester, Julian, On Intermediate Marginals in Martingale Optimal Transportation (April 19, 2020). Available at SSRN: https://ssrn.com/abstract=3579913 or http://dx.doi.org/10.2139/ssrn.3579913

Julian Sester (Contact Author)

Nanyang Technological University (NTU) - School of Physical and Mathematical Sciences ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

University of Freiburg

Freiburg, D-79085
Germany

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