Generalized Feynman-Kac Formula under volatility uncertainty

Bahar Akhtari, Francesca Biagini, Andrea Mazzon and Katharina Oberpriller

Papers from arXiv.org

Abstract: In this paper we provide a generalization of a Feynmac-Kac formula under volatility uncertainty in presence of a linear term in the PDE due to discounting. We state our result under different hypothesis with respect to the derivation given by Hu, Ji, Peng and Song (Comparison theorem, Feynman-Kac formula and Girsanov transformation for BSDEs driven by G-Brownian motion, Stochastic Processes and their Application, 124 (2)), where the Lipschitz continuity of some functionals is assumed which is not necessarily satisfied in our setting. In particular, we show that the $G$-conditional expectation of a discounted payoff is a viscosity solution of a nonlinear PDE. In applications, this permits to calculate such a sublinear expectation in a computationally efficient way.

Date: 2020-12, Revised 2022-11
New Economics Papers: this item is included in nep-rmg
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