scientific article; zbMATH DE number 1310477

MaRDI QIDQ4254477zbMATH OpenFDO

Authors Mariusz Michta

Publication date 21 June 2000

zbMATH Keywords

Girsanov transformationsvaluation pricing of arbitrage-free European derivative securitiesviability problemweak solution of stochastic differential equations

Mathematics Subject Classification ID

Stochastic integrals (60H05) Stochastic integral equations (60H20)

Review text

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.

Recommendations

• Stochastic control and compatible subsets of constraints
• Viable solutions of set-valued stochastic equation
• Stochastic viability of convex sets
• scientific article; zbMATH DE number 2061140

Cited in

(5)

• Exact and possible viability for controlled diffusions.
• A note on weak viability for controllled diffusion.
• Invariance for rough differential equations
• Stochastic control and compatible subsets of constraints
• Viability for differential equations driven by fractional Brownian motion

This page was built for publication:

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4254477)