G-Doob-Meyer Decomposition and its Application in Bid-Ask Pricing for American Contingent Claim Under Knightian Uncertainty
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.
Year of publication: |
2013-12
|
---|---|
Authors: | Chen, Wei |
Institutions: | arXiv.org |
Saved in:
Saved in favorites
Similar items by person
-
Statistical Properties and Pre-hit Dynamics of Price Limit Hits in the Chinese Stock Markets
Wan, Yu-Lei, (2015)
-
Stylized facts of price gaps in limit order books: Evidence from Chinese stocks
Gu, Gao-Feng, (2014)
-
Chen, Wei, (2011)
- More ...