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Quantitative Finance > Mathematical Finance

Title: Reduced-form framework under model uncertainty

Abstract: 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.
Subjects: Mathematical Finance (q-fin.MF)
Cite as: arXiv:1707.04475 [q-fin.MF]
  (or arXiv:1707.04475v2 [q-fin.MF] for this version)

Submission history

From: Yinglin Zhang [view email]
[v1] Fri, 14 Jul 2017 12:02:22 GMT (34kb)
[v2] Mon, 19 Mar 2018 17:39:45 GMT (31kb)