[] Model-independent no-arbitrage conditions on American put options

By continuing to browse this site you agree to us using cookies as described in About Cookies. Previous article in issue: Address correspondence to Alexander Cox, Department of Mathematical Sciences, University of Bath, Claverton Down, Bath BA2 7AY, UK; e-mail: We consider the pricing of American put options in a model-independent setting: We incorporate market information by supposing that the prices of European options are known.

In this setting, we are able to provide conditions on the American put prices which are necessary for the absence of arbitrage. Moreover, if we further assume that there are finitely many European and American options traded, then we model independent no arbitrage conditions on american put options able to show that these conditions are also sufficient.

To show sufficiency, we construct a model under which both American and European options are correctly priced at all strikes simultaneously. In particular, we need to carefully consider the optimal stopping strategy in the construction of our process.

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Model‐Independent No‐Arbitrage Conditions on American Put Options by Alexander Cox, Christoph Hoeggerl :: SSRN

Abstract We consider the pricing of American put options in a model-independent setting: Format Available Full text: Keywords model-independent arbitrage; American option; convex conjugate; Legendre—Fenchel transformation; Skorokhod embedding. Publication History Issue online: Articles related to the one you are viewing Please enable Javascript to view the related content of this article. Number of times cited: