Model uncertainty and the pricing of American options

详细信息    查看全文

• 作者：David Hobson ; Anthony Neuberger
• 关键词：American option ; Model ; free pricing ; Robust hedging ; Model risk ; Rational bounds
• 刊名：Finance and Stochastics
• 出版年：2017
• 出版时间：January 2017
• 年：2017
• 卷：21
• 期：1
• 页码：285-329
• 全文大小：
• 刊物类别：Mathematics and Statistics
• 刊物主题：Quantitative Finance; Finance, general; Statistics for Business/Economics/Mathematical Finance/Insurance; Economic Theory/Quantitative Economics/Mathematical Methods; Probability Theory and Stochastic
• 出版者：Springer Berlin Heidelberg
• ISSN：1432-1122
• 卷排序：21

文摘

The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This paper quantifies the potential value of this flexibility by identifying the supremum on the price of an American option when we do not impose a model, but rather consider the class of all models which are consistent with a family of European call prices. The bound is enforced by a hedging strategy involving these call options which is robust to model error.