Model-independent bounds for option prices - a mass transport approach

Mathias Beiglböck, Pierre Henry-Labordère, Friedrich Penkner

Abstract: In this paper we investigate model-independent bounds for exotic options written on a risky asset using infinite-dimensional linear programming methods. Based on arguments from the theory of Monge–Kantorovich mass transport, we establish a dual version of the problem that has a natural financial interpretation in terms of semi-static hedging. In particular we prove that there is no duality gap.