The relations of Choquet Integral and G-Expectation

Abstract

In incomplete financial markets, there exists a set of equivalent martingale measures (or risk-neutral probabilities) in an arbitrage-free pricing of the contingent claims. Minimax expectation is closely related to the $g$-expectation which is the solution of a certain stochastic differential equation. We show that Choquet expectation and minimax expectation are equal in pricing European type options, whose payoff is a monotone function of the terminal stock price $S_T$.