A note on pricing of contingent claims under G-expectation

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.

arXiv comment15 pages. arXiv admin note: substantial text overlap with arXiv:1212.5403, arXiv:1206.5889

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Cited by in corpus (1)

• Discrete-time approximation for backward stochastic differential equations driven by $G$-Brownian motion