Reduced-form framework for life insurance liabilities under model uncertainty

In this paper we extend the classic reduced-form setting for credit and insurance markets to the case under model uncertainty, when we consider a family of priors possibly mutually singular to each other. To this end, we... [ view full abstract ]

In this paper we extend the classic reduced-form setting for credit and insurance markets to the case under model uncertainty, when we consider a family of priors possibly mutually singular to each other. To this end, we introduce on a progressively enlarged filtration a sublinear conditional expectation with respect to a family of possibly nondominated probability measures. Furthermore, we study the superhedging approach in continuous time for payment streams under model uncertainty, and establish several equivalent versions of dynamic robust superhedging duality.