IDEAS home Printed from https://ideas.repec.org/h/wsi/wschap/9789814407892_0010.html
   My bibliography  Save this book chapter

Monetary Valuation Of Cash Flows Under Knightian Uncertainty

In: Finance at Fields

Author

Listed:
  • HANS FÖLLMER

    (Humboldt-Universitä zu Berlin, Institut für Mathematik, Unter den Linden 6, 10099 Berlin, Germany)

  • IRINA PENNER

    (Humboldt-Universitä zu Berlin, Institut für Mathematik, Unter den Linden 6, 10099 Berlin, Germany)

Abstract

The classical valuation of an uncertain cash flow in discrete time consists in taking the expectation of the sum of the discounted future payoffs under a fixed probability measure, which is assumed to be known. Here we discuss the valuation problem in the context of Knightian uncertainty. Using results from the theory of convex risk measures, but without assuming the existence of a global reference measure, we derive a robust representation of concave valuations with an infinite time horizon, which specifies the interplay between model uncertainty and uncertainty about the time value of money.

Suggested Citation

  • Hans Föllmer & Irina Penner, 2012. "Monetary Valuation Of Cash Flows Under Knightian Uncertainty," World Scientific Book Chapters, in: Matheus R Grasselli & Lane P Hughston (ed.), Finance at Fields, chapter 10, pages 249-263, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814407892_0010
    as

    Download full text from publisher

    File URL: https://www.worldscientific.com/doi/pdf/10.1142/9789814407892_0010
    Download Restriction: Ebook Access is available upon purchase.
    File URL: https://www.worldscientific.com/doi/abs/10.1142/9789814407892_0010
    Download Restriction: Ebook Access is available upon purchase.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:wschap:9789814407892_0010. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/page/worldscibooks .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.