Acceptability Bounds for Forward Starting Options Using Disciplined Convex Programming
12 Pages Posted: 26 Jul 2015
There are 2 versions of this paper
Acceptability Bounds for Forward Starting Options Using Disciplined Convex Programming
Acceptability Bounds for Forward Starting Options Using Disciplined Convex Programming
Date Written: November 1, 2014
Abstract
Acceptability pricing is formulated, for the dual problem, as a disciplined convex program solvable by the software CVXOPT. Forward starting options are used to illustrate the procedures for acceptability defined by positive expectation under the concave distortion minmaxvar. The measures used are required to reprice the liquid assets and must belong to the support set of acceptability. The bounds obtained bounds are substantially tighter than they would have been by leaving out either of the repricing constraints or the support sets for acceptability.
Keywords: Distorted Expectation, CVXOPT, Conic Duality
JEL Classification: G10, G11, G13
Suggested Citation: Suggested Citation