White noise generalizations of the Clark-Haussmann-Ocone theorem with application to mathematical finance (Q5926477): Difference between revisions

Let \(B_{t}(w),\) \(w\in \Omega\), be a \(1\)-dimensional Wiener process on a probability space \((\Omega, \mathcal{F}, P)\) such that \(B(0,w)=0\) a.s. with respect to \(P.\) For \(t\geq 0\) let \(\mathcal{F}_{t}\) be the \(\sigma\)-algebra generated by \(\{B(s,.); s\leq t\}.\) Fix \(T>0.\) The Clark-Haussmann-Ocone (CHO) theorem states that if \(F=F(w)\in L^{2}(P)\) is \(\mathcal{F}_{T}\)-measurable and \(F\in {\mathbf D}_{1,2},\) then \[ F(w)=E[F]+\int_{0}^{T}E[D_{t}F/\mathcal{F}_{t}](w) dB_{t}(w), \] where \(D_{t}F\) denotes the Malliavin derivative of \(F\) at \(t.\) This result and its generalizations have important applications in economics, where \(E[D_{t}F/\mathcal{F}_{t}]\) represents the replicating portfolio of a given \(T\)-claim \(F.\) The purpose of this paper is to present a new proof of the CHO formula in the setting of white noise analysis. One of the advantages with this approach is that it allows a generalization of the CHO formula which is valid for all \(\mathcal{F}_{t}\)-measurable \(F\in G^{*},\) a space of stochastic distributions which contains \(L^{2}(\mu),\) where \(\mu\) is the white noise probability measure (\(\mu\) corresponds to \(P\) in the Wiener space setting). Using a white noise approach to Malliavin calculus the authors prove the following white noise generalization of the CHO formula: \[ F(w)=E[F]+\int_{0}^{T}E[D_{t}F/\mathcal{F}_{t}]\diamondsuit W(t) dt. \] Here \(\diamondsuit\) denotes the Wick product and \(W(t)\) is a \(1\)-dimensional Gaussian white noise. The authors also establish similar results for multidimensional Gaussian white noise, for multidimensional Poissonian white noise and for combined Gaussian and Poissonian noise. Finally the authors give an application to mathematical finance. They compute the replicating portfolio for a European call option in a Poissonian Black-Scholes type market.