Author:
Biagini Francesca,Oberpriller Katharina
Abstract
<p style='text-indent:20px;'>In this paper we extend the reduced-form setting under model uncertainty introduced in [<xref ref-type="bibr" rid="b5">5</xref>] to include intensities following an affine process under parameter uncertainty, as defined in [<xref ref-type="bibr" rid="b15">15</xref>]. This framework allows us to introduce a longevity bond under model uncertainty in a way consistent with the classical case under one prior and to compute its valuation numerically. Moreover, we price a contingent claim with the sublinear conditional operator such that the extended market is still arbitrage-free in the sense of “no arbitrage of the first kind” as in [<xref ref-type="bibr" rid="b6">6</xref>]. </p>
Publisher
American Institute of Mathematical Sciences (AIMS)
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