Bounding Security Prices in Incomplete Markets - Does Stochastic Volatility Matter?

We extend and generalize some results on bounding security prices under several stochastic volatility models that provide closed-form expressions for option prices. In detail, we have computed analytical expressions for benchmark and standard good-deal bounds. For all the models, our findings show that our benchmark results show much tighter bounds. Moreover, an extensive sensitivity analysis is carried out. Finally, Greeks for bounds provide us strong practical applications taking into account the relevance of pricing and hedging strategies for financial institutions

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Year of publication:	2010
Authors:	Marroquin-Martinez, Naroa
Other Persons:	Moreno, Manuel (contributor)
Publisher:	[2010]: [S.l.] : SSRN
Subject:	Unvollkommener Markt \| Incomplete market \| Volatilität \| Volatility \| Stochastischer Prozess \| Stochastic process \| CAPM \| Optionspreistheorie \| Option pricing theory \| Börsenkurs \| Share price

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