G-Brownian Motion and Dynamic Risk Measure under Volatility Uncertainty
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Publication:6207530
arXiv0711.2834MaRDI QIDQ6207530FDOQ6207530
Authors: Shige Peng 
Publication date: 18 November 2007
Abstract: We introduce a new notion of G-normal distributions. This will bring us to a new framework of stochastic calculus of Ito's type (Ito's integral, Ito's formula, Ito's equation) through the corresponding G-Brownian motion. We will also present analytical calculations and some new statistical methods with application to risk analysis in finance under volatility uncertainty. Our basic point of view is: sublinear expectation theory is very like its special situation of linear expectation in the classical probability theory. Under a sublinear expectation space we still can introduce the notion of distributions, of random variables, as well as the notions of joint distributions, marginal distributions, etc. A particularly interesting phenomenon in sublinear situations is that a random variable Y is independent to X does not automatically implies that X is independent to Y. Two important theorems have been proved: The law of large number and the central limit theorem.
Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Stochastic integrals (60H05) Applications of stochastic analysis (to PDEs, etc.) (60H30)
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