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Gain-loss pricing under ambiguity of measure

Mustafa Ç. Pınar (2010)

ESAIM: Control, Optimisation and Calculus of Variations

Motivated by the observation that the gain-loss criterion, while offering economically meaningful prices of contingent claims, is sensitive to the reference measure governing the underlying stock price process (a situation referred to as ambiguity of measure), we propose a gain-loss pricing model robust to shifts in the reference measure. Using a dual representation property of polyhedral risk measures we obtain a one-step, gain-loss criterion based theorem of asset pricing under ambiguity of...

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