Global Structure and Local Specifications in Sublinear Valuation
Jongjin Park, David Criens, Hyungbin Park
Abstract
This work studies the relationships among sublinear valuation rules, uncertainty structures, and local specifications in a time-homogeneous Markovian framework with killing. These objects are linked, under finiteness and locality of the upper generator and a Lyapunov condition, by three maps: robust valuation, globalization, and localization. First, we show that the corresponding classes of uncertainty structures and sublinear valuation rules are order-isomorphic via the robust valuation map. Second, our analysis clarifies how local specifications constrain sublinear valuation and uncertainty structures, as well as what information localization and globalization preserve. In particular, the compositions of localization and globalization need not recover the original objects but yield canonical extremal elements. Third, the sublinear valuation generated by a local specification is characterized by the greatest viscosity subsolution of the associated Hamilton--Jacobi--Bellman equation. Finally, each uncertainty structure with killing admits a unique representation by a family of pairs consisting of a cumulative discounting process and an underlying state law. These results provide a framework for order relations, probabilistic and PDE-based representations, and model recovery in sublinear valuation without requiring uniqueness of the underlying martingale problems or a viscosity comparison principle.
Create a lesson
Related papers
Portfolio Choice under General Utility with Transaction Costs and Search Frictions
Tae Ung Gang, Donghan Kim
Negative Oil & Nickel Squeeze: A Feedback Model for Extreme Commodity Futures Prices
Iosif Zimbidis, Ronnie Sircar
Dyson-Schwinger Effective-Action Methods for Rough Volatility: A Correlation-Response Architecture for Calibration, Exotics and Risk
Frédéric Pauquay
Finite-Horizon Reversible Investment under Multi-Factor Dynamics
Junkee Jeon, Takwon Kim, Jinwan Park et al.
When Hedging Changes the Payoff: Option Replication with Price Impact and Execution Costs
David Itkin, Leandro Sánchez-Betancourt
Optimal Liquidation with Support and Resistance Levels under Multi-Skew Brownian Motion
Jun Maeda