Improved Fréchet bounds and model-free pricing of multi-asset options

Abstract

Improved bounds on the copula of a bivariate random vector are computed when partial information is available, such as the values of the copula on a given subset of [0, 1]², or the value of a functional of the copula, monotone with respect to the concordance order. These results are then used to compute model-free bounds on the prices of two-asset options which make use of extra information about the dependence structure, such as the price of another two-asset option.