Reduced-form framework under model uncertainty
Francesca Biagini and
Papers from arXiv.org
In this paper we introduce a sublinear conditional expectation with respect to a family of possibly nondominated probability measures on a progressively enlarged filtration. In this way, we extend the classic reduced-form setting for credit and insurance markets to the case under model uncertainty, when we consider a family of priors possibly mutually singular to each other. Furthermore, we study the superhedging approach in continuous time for payment streams under model uncertainty, and establish several equivalent versions of dynamic robust superhedging duality. These results close the gap between robust framework for financial market, which is recently studied in an intensive way, and the one for credit and insurance markets, which is limited in the present literature only to some very specific cases.
New Economics Papers: this item is included in nep-mic
Date: 2017-07, Revised 2018-03
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1707.04475
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