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Semiparametric bounds of mean and variance for exotic options

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Abstract

Finding semiparametric bounds for option prices is a widely studied pricing technique. We obtain closed-form semiparametric bounds of the mean and variance for the pay-off of two exotic (Collar and Gap) call options given mean and variance information on the underlying asset price. Mathematically, we extended domination technique by quadratic functions to bound mean and variances.

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Authors and Affiliations

  1. Department of Mathematics, Harbin Institute of Technology, Harbin, 150006, China

    GuoQing Liu

  2. Department of Mathematical Sciences, University of Delaware, Newark, DE, 19716, USA

    V. Wenbo Li

Authors
  1. GuoQing Liu
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  2. V. Wenbo Li
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Correspondence to GuoQing Liu.

Additional information

This work was supported by National Science Foundation of the United States (Grant Nos. DMS-0720977 and DMS-0805929)

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Liu, G., Li, V.W. Semiparametric bounds of mean and variance for exotic options. Sci. China Ser. A-Math. 52, 1446–1458 (2009). https://doi.org/10.1007/s11425-009-0105-8

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  • DOI: https://doi.org/10.1007/s11425-009-0105-8

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