Pricing the American Options from the Viewpoints of Traders - Innovative Management in Information and Production - page 302

variable denoting the position of the AOs. By inspecting the dual properties of the
arbitrage model, we obtain a new theorem in the arbitrage-free market. Namely,
the initial price of AO is equal to the expectation of all the possible payoff at each
state under the synthesis probability measure. The synthesis probability is endowed
by the solution of the dual variables.
References
P.J. Hunt, J.E. Kennedy, Financial Derivatives in the Theory and Practice (Wiley, New York 2000)
A.J. King, Duality and martingales: a stochastic programming perspective on contingent claims.
Math. Program. Ser. B 91 , 543-562 (2002)