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Mathematics and Financial Economics

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01.06.2014

Bid and ask prices as non-linear continuous time G-expectations based on distortions

verfasst von: Ernst Eberlein, Dilip B. Madan, Martijn Pistorius, Marc Yor

Erschienen in: Mathematics and Financial Economics | Ausgabe 3/2014

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Abstract

Probability distortions for constructing nonlinear G-expectations for the bid and ask or lower and upper prices in continuous time are here extended to the direct use of measure distortions. Fairly generally measure distortions can be constructed as probability distortions applied to an exponential distribution function on the half line. The valuation methodologies are extended beyond contract valuation to the valuation of economic activities with infinite lives. Explicit computations illustrate the procedures for stock indices and insurance loss processes.

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Titel: Bid and ask prices as non-linear continuous time G-expectations based on distortions
verfasst von: Ernst Eberlein
Dilip B. Madan
Martijn Pistorius
Marc Yor
Publikationsdatum: 01.06.2014
Verlag: Springer Berlin Heidelberg
Erschienen in: Mathematics and Financial Economics / Ausgabe 3/2014
Print ISSN: 1862-9679
Elektronische ISSN: 1862-9660
DOI: https://doi.org/10.1007/s11579-014-0117-1

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