MODEL-INDEPENDENT BOUNDS FOR OPTION PRICES: A MASS TRANSPORT APPROACH

Abstract

Abstract. In this paper we investigate model-independent bounds for exotic options written on a risky asset us-ing infinite-dimensional linear programming methods. Using 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.