Stochastic representation under g-expectation and applications: The discrete time case

Miryana Grigorova and Hanwu Li
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Miryana Grigorova: Center for Mathematical Economics, Bielefeld University
Hanwu Li: Center for Mathematical Economics, Bielefeld University

No 721, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: In this paper, we address the stochastic representation problem in discrete time under (non-linear) g-expectation. We establish existence and uniqueness of the solution, as well as a characterization of the solution. As an application, we investigate a new approach to the optimal stopping problem under g-expectation and the related pricing of American options under Knightian uncertainty. Our results are also applied to a (non-linear) Skorokhod-type obstacle problem.

Keywords: Stochastic representation; g-expectation; Optimal stopping problem; Skorokhod problem (search for similar items in EconPapers)
Pages: 19
Date: 2025-07-18
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https://pub.uni-bielefeld.de/download/3005284/3005285 First Version, 2022 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:721

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