Research Reports from the Department of Operations
Document Type
Report
Publication Date
5-1-1987
Abstract
This article generalizes the single period linear programming option bound prices by allowing for a finite number of revision opportunities. It is shown, that, in an incomplete market, the bounds on option prices can be derived using a modified binomial option pricing model. Tighter bounds are developed under more restrictive assumptions on probabilities and risk aversion. For this case the upper bounds are shown to coincide with the upper bounds derived by Perrakis, while the lower bounds are shown to be tighter.
Keywords
Operations research, Options (Finance)--Mathematical models, Binomial theorem, Linear programming, Risk--Mathematical models, Financial engineering--Mathematical models, Markets--Mathematical models
Publication Title
Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University
Issue
Technical memorandum no. 627
Rights
This work is in the public domain and may be freely downloaded for personal or academic use
Recommended Citation
Ritchken, Peter H. and Kuo, Shyanjaw, "Option Bounds with Finite Revision Opportunities" (1987). Research Reports from the Department of Operations. 408.
https://commons.case.edu/wsom-ops-reports/408
