Trajectorial market models: arbitrage and pricing intervals

• Sebastián E. Ferrando ^[1] ; Alfredo L. González ^[2] ; Iván L. Degano ^[2] ; Massoomeh Rahsepar ^[1]
  1. [1] Ryerson University

     Ryerson University

     Canadá

     
  2. [2] Universidad Nacional de Mar del Plata

     Universidad Nacional de Mar del Plata

     Argentina

     
• Localización: Revista de la Unión Matemática Argentina, ISSN 0041-6932, ISSN-e 1669-9637, Vol. 60, Nº. 1, 2019, págs. 149-185
• Idioma: inglés
• DOI: 10.33044/revuma.v60n1a10
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• Resumen

  • The paper develops general, non-probabilistic market models based on trajectory sets and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of a martingale process as well as a generalization that allows a limited notion of arbitrage in the market while still providing coherent option prices. An illustrative example is described in detail. Several properties of the price bounds are obtained, in particular a connection with risk neutral pricing is established for trajectory markets associated to a continuous-time martingale model.