Quasi-sure stochastic analysis through aggregation

DOI10.1214/EJP.V16-950zbMATH Open1245.60062arXiv1003.4431MaRDI QIDQ428554FDOQ428554

Nizar Touzi, H. Mete Soner, Jianfeng Zhang

Publication date: 22 June 2012

Published in: Electronic Journal of Probability (Search for Journal in Brave)

Abstract: This paper is on developing stochastic analysis simultaneously under a general family of probability measures that are not dominated by a single probability measure. The interest in this question originates from the probabilistic representations of fully nonlinear partial differential equations and applications to mathematical finance. The existing literature relies either on the capacity theory (by Denis and Martini), or on the underlying nonlinear partial differential equation (by Peng). In both approaches, the resulting theory requires the smoothness of the corresponding processes and random variables in terms of the underlying canonical process. In this paper, we investigate this question for a larger class of "non-smooth" processes, but with a restricted family of non-dominated probability measures. For smooth processes, our approach leads to similar results as in previous literature, provided the restricted family satisfies an additional density property.

Full work available at URL: https://arxiv.org/abs/1003.4431

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zbMATH Keywords

uncertain volatility modelnon-dominated probability measuresquasi-sure stochastic analysisweak solutions of SDEs

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Applications of stochastic analysis (to PDEs, etc.) (60H30)

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