Model-free bounds for multi-asset options -- improved Fréchet-Hoeffding and optimal transport approaches

Antonis Papapantoleon (TU Berlin)
Thursday, June 1, 2017 - 5:00pm
TU Berlin, Straße des 17. Juni 136, 10623 Berlin, Raum MA 043

We consider a multivariate random variable with known marginals and unknown dependence structure. In this talk, we will present several methods for sharpening the classical Fréchet-Hoeffding bounds on copulas by using additional, partial information on the dependence structure. Then we will discuss applications of these results for deriving bounds on option prices and portfolio Value-at-Risk in this setting of model / dependence uncertainty. We will also discuss the detection of arbitrage in multi-asset markets and model-free hedging of multi-asset derivatives.