Knightian Uncertainty and Dynamic Robust Pricing of Reload Stock Option

Author

Zhang Hui ; Meng Wenyu ; Lai Xiang

Author_Institution

Sch. of Stat. & Math., Shandong Finance Univ., Jinan, China

Volume

2

fYear

2010

fDate

13-14 March 2010

Firstpage

564

Lastpage

567

Abstract

The financial market with Knightian uncertainty is studied. Applying the important theories of backward stochastic differential equation and the method of time-risk discount, the dynamic robust pricing model of reload stock option has been studied. The explicit solution of the model has been given. At last, the article takes the stock of Sinopec as example to perform numerical analysis. The paper depicts the important impact of Knightian uncertainty and the reload time on the dynamic robust pricing of reload stock option.

Keywords

differential equations; pricing; stochastic processes; stock markets; uncertainty handling; Knightian uncertainty; Sinopec; backward stochastic differential equation; dynamic robust pricing; financial market; reload stock option; time-risk discount; Automation; Differential equations; Mathematics; Mechatronics; Numerical analysis; Pricing; Robustness; Statistics; Stochastic processes; Uncertainty; Knightian uncertainty; backward stochastic differential equation; reload stock option; robust pricing; time-risk discount;

fLanguage

English

Publisher

ieee

Conference_Titel

Measuring Technology and Mechatronics Automation (ICMTMA), 2010 International Conference on

Conference_Location

Changsha City

Print_ISBN

978-1-4244-5001-5

Electronic_ISBN

978-1-4244-5739-7

Type

conf

DOI

10.1109/ICMTMA.2010.218

Filename

5459754