In this article we consider the problem of giving a robust, model-independent, lower bound on the price of a forward starting straddle with payoff $|F_{T_1} - F_{T_0}|$ where $0T_0T_1$. Rather than assuming a model for the underlying forward price $(F_t)_{t \geq 0}$, we assume that call prices...

<Para ID="Par1">We consider the problem of giving a robust, model-independent, lower bound on the price of a forward starting straddle with payoff <InlineEquation ID="IEq1"> <EquationSource Format="TEX">$|F_{T_{1}} - F_{T_{0}}|$</EquationSource> </InlineEquation>, where 0T <Subscript>0</Subscript>T <Subscript>1</Subscript>. Rather than assuming a model for the underlying forward price (F <Subscript> t </Subscript>)<Subscript> t≥0</Subscript>, we assume that call prices for maturities T...</subscript></subscript></subscript></subscript></subscript></equationsource></inlineequation></para>

A variance swap is a derivative with a path-dependent payoff which allows investors to take positions on the future variability of an asset. In the idealised setting of a continuously monitored variance swap written on an asset with continuous paths it is well known that the variance swap payoff...

We provide a complete characterization of the class of one-dimensional time-homogeneous diffusions consistent with a given law at an exponentially distributed time using classical results in diffusion theory. To illustrate we characterize the class of diffusions with the same distribution as...