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@article{Badikov:2017:10.1080/14697688.2016.1267392,
author = {Badikov, SB and Jacquier, A and Liu, DQ and Roome, PR},
doi = {10.1080/14697688.2016.1267392},
journal = {Quantitative Finance},
pages = {1243--1256},
title = {No-arbitrage bounds for the forward smile given marginals},
url = {http://dx.doi.org/10.1080/14697688.2016.1267392},
volume = {17},
year = {2017}
}

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TY  - JOUR
AB  - We explore the robust replication of forward-start straddles given quoted (Call and Put options) market data. One approach to this problem classically follows semi-infinite linear programming arguments, and we propose a discretisation scheme to reduce its dimensionality and hence its complexity. Alternatively, one can consider the dual problem, consisting in finding optimal martingale measures under which the upper and the lower bounds are attained. Semi-analytical solutions to this dual problem were proposed by Hobson and Klimmek and by Hobson and Neuberger. We recast this dual approach as a finite dimensional linear programme, and reconcile numerically, in the Black-Scholes and in the Heston model, the two approaches.
AU  - Badikov,SB
AU  - Jacquier,A
AU  - Liu,DQ
AU  - Roome,PR
DO  - 10.1080/14697688.2016.1267392
EP  - 1256
PY  - 2017///
SN  - 1469-7696
SP  - 1243
TI  - No-arbitrage bounds for the forward smile given marginals
T2  - Quantitative Finance
UR  - http://dx.doi.org/10.1080/14697688.2016.1267392
UR  - http://hdl.handle.net/10044/1/42941
VL  - 17
ER  -

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