Abstract
This paper considers the nonlinear theory of G-martingales as introduced by Peng (2007) in [16,17]. A martingale representation theorem for this theory is proved by using the techniques and the results established in Soner et al. (2009) [20] for the second-order stochastic target problems and the second-order backward stochastic differential equations. In particular, this representation provides a hedging strategy in a market with an uncertain volatility.
Original language | English (US) |
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Pages (from-to) | 265-287 |
Number of pages | 23 |
Journal | Stochastic Processes and their Applications |
Volume | 121 |
Issue number | 2 |
DOIs | |
State | Published - Feb 2011 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Statistics and Probability
- Modeling and Simulation
- Applied Mathematics
Keywords
- 2BSDE
- BSDE
- G-expectation
- G-martingale
- duality
- nonlinear expectation
- singular measure
- stochastic target problem