Robust pricing and hedging of double no-touch options

Double no-touch options, contracts which pay out a fixed amount provided an underlying asset remains within a given interval, are commonly traded, particularly in FX markets. In this work, we establish model-free bounds on the price of these options based on the prices of more liquidly traded options (call and digital call options). Key steps are the construction of super- and sub-hedging strategies to establish the bounds, and the use of Skorokhod embedding techniques to show the bounds are the best possible. In addition to establishing rigorous bounds, we consider carefully what is meant by arbitrage in settings where there is no {\it a priori} known probability measure. We discuss two natural extensions of the notion of arbitrage, weak arbitrage and weak free lunch with vanishing risk, which are needed to establish equivalence between the lack of arbitrage and the existence of a market model.Comment: 32 pages, 5 figure

C-CAPM Refinements and the Cross-Section of Returns

Consumption-based asset pricing, Habit persistence, Idiosyncratic risk, Conditional asset pricing, G12, E130, E320,

The cross-section of equity returns and assets’ fundamental cash-flow risk

Return decomposition, Cash-flow news, Discount-rate news, Consumption growth, E21, G11, G12,

Stock Portfolio Excess Returns and Macroeconomic Variables: An Empirical Analysis of the Singapore Stock Market

10.1007/BF01731421Asia Pacific Journal of Management7221-4

Weighted V@R and its Properties

Capital allocation, Coherent risk measures, Determining set, Distorted measures, Minimal extreme measure, No-good-deals pricing, Spectral risk measures, Strict diversification, Tail V@R, Weighted V@R, 91B16, 91B30, G10, G11, G12,