Arbitrage and Hedging Under Model Uncertainty

Monday, December 14, 2015 - 2:25pm - 3:25pm
Lind 305
Zhou Zhou (University of Minnesota, Twin Cities)
Parametric estimation from market data often ends up with confidence intervals instead of points, which results in uncertainty of market models. Mathematically, this uncertainty is represented by a set of probability measures that are not necessarily dominated. In this talk, we will discuss the arbitrage and hedging under non-dominated model uncertainty for various cases in discrete time. We will consider the trading strategies in which stocks are traded dynamically, and liquid options are traded statically.