The CEV model and its application to financial markets with volatility uncertainty

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

卷:344

Article

Yuan, Weipeng¹  Lai, Shaoyong¹ 

[1] Southwestern Univ Finance & Econ, Sch Econ Math, Chengdu 611130, Sichuan, Peoples R China

关键词: Pricing of contingent claims;    Volatility uncertainty;    CEV model;    G-Brownian motion;   

DOI  :  10.1016/j.cam.2018.05.015

来源: Elsevier

【 摘 要 】

We survey the financial markets whose risks are caused by uncertain volatilities. The financial markets focus on the assets which are effectively allocated in one risk-free asset and one risky asset, whose price process is governed by the constant elasticity of variance (CEV for short) model which contains the G-Brownian motion rather than the classical Brownian motion. Such the CEV model which includes the G-Brownian motion utilized to financial markets is the extension of the classical CEV model. Applying the concept of arbitrage and the properties of G-expectation, we consider stock price dynamics which exclude arbitrage opportunities. Moreover, the interval of no-arbitrage price for the general European contingent claims is found in the Markovian case. (C) 2018 Elsevier B.V. All rights reserved.

【 授权许可】

Free