Computing lower bounds on basket option prices by discretizing semi-infinite linear programming

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The problem of finding static-arbitrage bounds on basket option prices has received a growing attention in the literature. In this paper, we focus on the lower bound case and propose a novel efficient solution procedure that is based on the separation problem. The computational burden of the proposed method is polynomial in the input data size. We also discuss the case of possibly negative weight vectors which can be applied to spread options.
Publisher
SPRINGER HEIDELBERG
Issue Date
2016-12
Language
English
Article Type
Article
Keywords

ARBITRAGE UPPER-BOUNDS

Citation

OPTIMIZATION LETTERS, v.10, no.8, pp.1629 - 1644

ISSN
1862-4472
DOI
10.1007/s11590-015-0987-z
URI
http://hdl.handle.net/10203/214214
Appears in Collection
IE-Journal Papers(저널논문)
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