We use the technique of information relaxation to develop a duality-driven iterative approach to obtaining and improving confidence interval estimates for the true value of finite-horizon stochasticdynamic programming problems. We show that the sequence of dual value estimates yielded from the...

The stochastic-alpha-beta-rho (SABR) model introduced by Hagan et al. (2002) provides a popular vehicle to model the implied volatilities in the interest rate and foreign exchange markets. To exclude arbitrage opportunities, we need to specify an absorbing boundary at zero for this model, which...