Dynamically Consistent Nonlinear Evaluations and Expectations
Probability
2007-05-23 v1 Functional Analysis
Abstract
How an economic agent (a firm, an investor or a financial market) evaluates a contingent claim, say a European type of derivatives X, with maturity t? In this paper we study a mechanism of dynamic expectations and evaluations. We give the axiomatic conditions of the time consistency. We prove that, under a domination condition, a time consistent nonlinear evaluation is in fact a g-expectation, i.e., it is completely determined a BSDE in which the generator is a given function g.
Cite
@article{arxiv.math/0501415,
title = {Dynamically Consistent Nonlinear Evaluations and Expectations},
author = {Shi-Ge Peng},
journal= {arXiv preprint arXiv:math/0501415},
year = {2007}
}
Comments
46 pages