Valuation Bounds on Barrier Options Under Model Uncertainty

Yi Hong*

*Corresponding author for this work

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Abstract

This article investigates valuation bounds on barrier options under model uncertainty. This investigation enriches the literature on the model-free valuation of these exotic options. It is found that with weak assumptions on underlying price processes, tight valuation bounds on barrier options can be sought from a set of European options. As a result, the numerical routine developed in this article can be reviewed as a new method for the evaluation of barrier options, which is independent of model assumptions.

Original languageEnglish
Pages (from-to)199-234
Number of pages36
JournalJournal of Futures Markets
Volume33
Issue number3
DOIs
Publication statusPublished - Mar 2013

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Hong, Y. (2013). Valuation Bounds on Barrier Options Under Model Uncertainty. Journal of Futures Markets, 33(3), 199-234. https://doi.org/10.1002/fut.21545