Model and parameter uncertainties are ubiquitous whenever a parametric model is selected to value a derivative instrument. Combining the Monte Carlo method and the Smolyak interpolation algorithm, this paper proposes an accurate and efficient numerical method to quantify the uncertainty embedded...

In arbitrage-free but incomplete markets, the equivalent martingale measure Q for pricing traded assets is not uniquely determined. A possible approach when it comes to choosing a particular pricing measure is to consider the one that is "closest" to the physical probability measure P, where...