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A note on pricing of contingent claims under G-expectation

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  • Mingshang Hu
  • Shaolin Ji
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    Abstract

    In this paper, we study the pricing of contingent claims under G-expectation. In order to accomodate volatility uncertainty, the price of the risky security is supposed to governed by a general linear stochastic differential equation (SDE) driven by G-Brownian motion. Utilizing the recently developed results of Backward SDE driven by G-Brownian motion, we obtain the superhedging and suberhedging prices of a given contingent claim. Explicit results in the Markovian case are also derived.

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    File URL: http://arxiv.org/pdf/1303.4274
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    Paper provided by arXiv.org in its series Papers with number 1303.4274.

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    Date of creation: Mar 2013
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    Handle: RePEc:arx:papers:1303.4274

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