Weatherhead School of Management, Case Western Reserve University. I wish to thank the referees for helpful comments on various versions of this paper.
On Option Pricing Bounds
Article first published online: 30 APR 2012
1985 The American Finance Association
The Journal of Finance
Volume 40, Issue 4, pages 1219–1233, September 1985
How to Cite
RITCHKEN, P. H. (1985), On Option Pricing Bounds. The Journal of Finance, 40: 1219–1233. doi: 10.1111/j.1540-6261.1985.tb02373.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
The purpose of this article is to compare the Perrakis and Ryan bounds of option prices in a single-period model with option bounds derived using linear programming. It is shown that the upper bounds are identical but that the lower bounds are different. A comparison of these bounds, together with Merton's bounds and the Black-Scholes prices in a lognormal securities market, is presented.