Properties of minimal mathematical expectations

DOI10.1016/J.AML.2005.01.003MaRDI QIDQ812740zbMATH OpenOpenAlexFDO

Authors Yongqing Wei, Peiyu Liu

Publication date 24 January 2006

Published in Applied Mathematics Letters (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.aml.2005.01.003

zbMATH Keywords

\(g\)-expectationbackward stochastic differential equationminimal conditional expectationminimal expectation

Mathematics Subject Classification ID

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

Review text

Let \(\mu>0\) be an arbitrarily fixed real and \(B\) a \(d\)-dimensional Brownian motion defined on a probability space \((\Omega,{\mathcal F},P)\). By \({\mathcal P}\) we denote the set of all probabilities \[ Q= \exp \Biggl\{\int_0^T\theta_t\,dB_t- \tfrac12\cdot \int_0^T| \theta_t|^2\,dt \Biggr\}\cdot P, \] where \(\theta\) runs all \(({\mathcal F}^B_t)\)-adapted processes bounded by \(\mu\). The authors study the properties of the minimal expectation defined for \(\xi\in \bigcup_{p>1}L^p(\Omega,{\mathcal F}^B_T,P)\) by \({\mathcal E}[\xi]=\inf_{Q\in {\mathcal P}}E_Q[\xi]\) and also its associated minimal conditional expectation. Using a result of \textit{N. El Karoui, S. Peng} and \textit{M. C. Quenez} [Math. Finance 7, No. 1, 1--71 (1997; Zbl 0884.90035)], \({\mathcal E}[.]\) is identified with the \(g\)-expectation \({\mathcal E}_g[.]\) (for \(g(z)=-\mu| z|\)) introduced by \textit{S. Peng} [in: Backward stochastic differential equations. Pitman Res. Notes Math. Ser. 364, 141--159 (1997; Zbl 0892.60066)]. The properties of \({\mathcal E}\) are consequently those of \({\mathcal E}_g.\) Apart from these properties the authors study also the Brownian motion \(B\) w.r.t. \({\mathcal E}\). A lot of explicit examples are given to illustrate their results.

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Cites work

• Ambiguity, Risk, and Asset Returns in Continuous Time
• Backward Stochastic Differential Equations in Finance
• Choquet expectation and Peng's \(g\)-expectation
• scientific article; zbMATH DE number 3780265 (Why is no real title available?)
• scientific article; zbMATH DE number 1066320 (Why is no real title available?)
• Probabilistic interpretation for systems of quasilinear parabolic partial differential equations
• Subjective Probability and Expected Utility without Additivity

Cited in

(3)

• The minimal sublinear expectations and their related properties
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