Skewness and option bounds: Short variance swaps and variance risk premium

• Main Authors: Huang, Junying, Jordan, S.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2014
• Subjects: semi-parametric; bounds; options; skewness; variance risk; swaps; Finance and Financial Management; Management Sciences and Quantitative Methods
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3654
• Institution: Singapore Management University

Semi-parametric upper bounds for option prices and expected payoffs are derived for call options. These bounds depend only on the first three moments and not on the underlying stock distribution in general. Bounds on variance default swaps, a new asset, are derived.