Third-order extensions of Lo’s semiparametric bound for European call options |
| |
Authors: | Luis F. Zuluaga,Javier Peñ a,Donglei Du |
| |
Affiliation: | 1. Faculty of Business Administration, University of New Brunswick, P.O. Box 4400, Fredericton, NB, Canada E3B 5A3;2. Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213, USA |
| |
Abstract: | Computing semiparametric bounds for option prices is a widely studied pricing technique. In contrast to parametric pricing techniques, such as Monte-Carlo simulations, semiparametric pricing techniques do not require strong assumptions about the underlying asset price distribution. We extend classical results in this area. Specifically, we derive closed-form semiparametric bounds for the payoff of a European call option, given up to third-order moment (i.e., mean, variance, and skewness) information on the underlying asset price. We analyze how these bounds tighten the corresponding bounds, when only second-order moment (i.e., mean and variance) information is provided. We describe applications of these results in the context of option pricing; as well as in other areas such as inventory management, and actuarial science. |
| |
Keywords: | Applied probability Option pricing Inventory management Stop-loss premium Third moment |
本文献已被 ScienceDirect 等数据库收录! |
|