Iñaki R. Longarela
Iñaki R. Longarela: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Abstract: Bernardo and Ledoit (2000) develop a very appealing framework to compute pricing bounds based on the so-called gain-loss ratio. Their method has many advantages and very interesting properties and so far one important drawback: the complexity of the numerical computation of the pricing bounds. In this note we provide an simple procedure for their computation which only entails solving a linear optimization program.
5 pages, First version: September 4, 2000. Revised: October 18, 2000. Earlier revisions: September 8, 2000, October 17, 2000, October 17, 2000.
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