It is possible to price an option (or at least to derive upper/lower bounds) if I know only the first 2 moments of the distribution? Or assuming that the distribution is symmetric so skew is 0.
I was playing around with mixture of normals approach, summing 2 B-S prices with weights that sum up to 1 and variances that sum up to my target variance, but I don't know if this approach makes sense. I really appreciate any help or advice on this.
Thank you!
P.S. Eldesdichado, thank you for your answer to my other question.
Options pricing from first 2 moments
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doobs
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Options pricing from first 2 moments
Take a look at this paper, I think there are some issues with this but you might find it interesting
On the relation between option and stock prices: a convex optimization approach, (Bertsimas with Ioana Popescu), Operations Research, 50, 2, 358--374, 2002
Edit: here is the paper
[url=/User%20Files/681/lastfin.pdf]Attached File: lastfin.pdf[/url]
On the relation between option and stock prices: a convex optimization approach, (Bertsimas with Ioana Popescu), Operations Research, 50, 2, 358--374, 2002
Edit: here is the paper
[url=/User%20Files/681/lastfin.pdf]Attached File: lastfin.pdf[/url]