I'm studying the way option can be priced in an incomplete market and I have found an example talking about the Cox-Ross-Rubinstein model with three path possible instead of 2, making the model incomplete. The idea was to consider a super replicating strategy and show that the initial value of this strategy is the intital value from the basic CRR model. However, I don't see how it helps to price an option in incomplete market since we have just found an upper bound, to approximate the price of the option we will need a lower bound in order to get the "better interval" no ? Am I wrong or Did'nt I understand well the idea of showing that the initial value of the super replicating strategy is the initial value from CRR model ?

  • $\begingroup$ The basic CRR model is as complete at the BS model. We have no idea about the example you found. Please provide more details. $\endgroup$
    – Kurt G.
    Jun 1 at 8:17
  • $\begingroup$ ... complete as the BS model $\endgroup$
    – Kurt G.
    Jun 1 at 8:28


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