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Existence and Uniqueness of Martingale Solutions to Option Pricing Equations with Noise

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Abstract

We introduce a new option pricing equation with noise in a frictional financial market, which is fully different from the classical option pricing equation, and arrive at the existence of martingale solutions of this option pricing equation regardless of incompressibility. Furthermore, we also discuss the uniqueness of martingale solutions.

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Authors and Affiliations

  1. Department of Applied Mathematics, Nanjing University of Science and Technology, Nanjing, 210094, Jiangsu, China

    Jun Zhao, Ru Zhou & Peibiao Zhao

Authors
  1. Jun Zhao
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  2. Ru Zhou
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  3. Peibiao Zhao
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Corresponding author

Correspondence to Peibiao Zhao.

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This work was supported by the National Natural Science Foundation (NNSF) of China (Nos. 11871275, 11371194) and Postgraduate Research & Practice Innovation Program of Jiangsu Province

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Zhao, J., Zhou, R. & Zhao, P. Existence and Uniqueness of Martingale Solutions to Option Pricing Equations with Noise. Lith Math J 60, 562–576 (2020). https://doi.org/10.1007/s10986-020-09499-1

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  • DOI: https://doi.org/10.1007/s10986-020-09499-1

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