No label defined (Q4254477)

Let \(K\) be a nonempty and closed subset of \(\mathbb{R}^n\) and \(\Pi_\varepsilon(K)\) be a set of probability measures \(\mu\) on Borel \(\sigma\)-field for which \(\mu(K)\geq 1-\varepsilon\) for given \(\varepsilon> 0\). The author considers the viability problem: \[ \begin{cases} dX_t= a(t,X)dt+ b(t,X)dW_t,\\ P^X_t\in \Pi_\varepsilon(K)\end{cases}\tag{1} \] for each \(t\in [0,T]\), \(T>0\), where \(a\), \(b\) are measurable mappings on \([0,T]\times C([0,T],\mathbb{R}^n)\), \((W_t)\), \(t\geq 0\), is an \({\mathcal I}_t\)-adapted Wiener process and \(P^\xi\) denotes the distribution on \(\mathbb{R}^n\) of the \(n\)-dimensional random vector \(\xi\). It is shown that under certain assumptions there exists a solution of problem (1). This result is applied to the problem of valuation pricing of arbitrage-free European derivative securities.