Robust upper bounds for American put options

Ye Du, Shan Xue, Yan Chu Liu

Abstract: In this paper, we develop robust and model-free upper bounds for American put option prices. Our bounds have all of those appealing features of the upper bounds for European options provided in DeMarzo et al. (2016, Robust option pricing: Hannan and Blackwell meet Black and Scholes, Journal of Economic Theory, 410-434) but cover more popular derivatives in practice. Numerical and empirical investigations illustrate the performance of our method.