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Duality in option pricing based on prices of other derivatives |
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| Authors: | Michi Nishihara Mutsunori Yagiura |
| Affiliation: | a Department of Applied Mathematics and Physics, Graduate School of Informatics, Kyoto University, Kyoto 606-8501, Japan b Department of Computer Science and Mathematical Informatics, Graduate School of Information Science, Nagoya University, Furocho, Chikusaku, Nagoya 464-8603, Japan c Department of Informatics, School of Science and Technology, Kwansei Gakuin University, Sanda 669-1337, Japan |
| Abstract: | We clarify a financial meaning of duality in the semi-infinite programming problem which emerges in the context of determining a derivative price range based only on the no-arbitrage assumption and the observed prices of other derivatives. The interpretation links studies in the above context to studies in stochastic models. |
| Keywords: | Option pricing Hedging Duality Semi-infinite programming |
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