Stochastic ordering by g-expectations

Sel Ly; Nicolas Privault

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arXiv · 2005.12580

Stochastic ordering by g-expectations

Sel Ly·Nicolas Privault

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Abstract

We derive sufficient conditions for the convex and monotonic g-stochastic ordering of diffusion processes under nonlinear g-expectations and g-evaluations. Our approach relies on comparison results for forward-backward stochastic differential equations and on several extensions of convexity, monotonicity and continuous dependence properties for the solutions of associated semilinear parabolic partial differential equations. Applications to contingent claim price comparison under different hedging portfolio constraints are provided.

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Sel Ly, Nicolas Privault. 2020-05-26. Stochastic ordering by g-expectations. https://arxiv.org/abs/2005.12580

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