G-Doob-Meyer Decomposition and its Application in Bid-Ask Pricing for American Contingent Claim Under Knightian Uncertainty

Wei Chen

Papers from arXiv.org

Abstract: The target of this paper is to establish the bid-ask pricing frame work for the American contingent claims against risky assets with G-asset price systems (see \cite{Chen2013b}) on the financial market under Knight uncertainty. First, we prove G-Dooby-Meyer decomposition for G-supermartingale. Furthermore, we consider bid-ask pricing American contingent claims under Knight uncertain, by using G-Dooby-Meyer decomposition, we construct dynamic superhedge stragies for the optimal stopping problem, and prove that the value functions of the optimal stopping problems are the bid and ask prices of the American contingent claims under Knight uncertain. Finally, we consider a free boundary problem, prove the strong solution existence of the free boundary problem, and derive that the value function of the optimal stopping problem is equivalent to the strong solution to the free boundary problem.

New Economics Papers: this item is included in nep-mst
Date: 2013-12
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1401.0677 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1401.0677

Access Statistics for this paper

More papers in Papers from arXiv.org
Series data maintained by arXiv administrators ().