Online trading algorithms and robust option pricing

In this work we show how to use efficient online trading algorithms to price the current value of financial instruments, such as an option. We derive both upper and lower bounds for pricing an option, using online trading algorithms. Our bounds depend on very minimal assumptions and are mainly derived assuming that there are no arbitrage opportunities. General Terms Algorithms, Theory, Economics Categories and Subject Descriptors I.2.6 [Learning]; F.2.2 [Nonnumerical Algorithms]; J.4 [Economics] Keywords Finance, Online Algorithms, Regret Minimization

• Type: Conference
• Year: 2006
• Where: STOC
• Authors: Peter DeMarzo, Ilan Kremer, Yishay Mansour
• Keywords: Algorithms, Efficient Online Trading, General Terms Algorithms, Online Trading Algorithms, STOC 2006