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Asset pricing under model uncertainty with finite time and states

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  • Shuzhen Yang
  • Wenqing Zhang

Abstract

In this study, we consider the asset pricing under model uncertainty with finite time and under a family of probability, and explore its relationship with risk neutral probability meastates structure. For the single-period securities model, we give a novel definition of arbitrage sure. Focusing on the financial market with short sales prohibitions, we separately investigate the necessary and sufficient conditions for no-arbitrage asset pricing based on nonlinear expectation which composed with a family of probability. When each linear expectation driven by the probability in the family of probability becomes martingale measure, the necessary and sufficient conditions are same, and coincide with the existing results. Furthermore, we expand the main results of single-period securities model to the case of multi-period securities model. By-product, we obtain the superhedging prices of contingent claim under model uncertainty.

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  • Shuzhen Yang & Wenqing Zhang, 2024. "Asset pricing under model uncertainty with finite time and states," Papers 2408.13048, arXiv.org.
    • Handle: RePEc:arx:papers:2408.13048
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    References listed on IDEAS

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