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Open Access Review

Toward uncertain finance theory

Baoding Liu

Author Affiliations

Baoding Liu, Uncertainty Theory Laboratory, Department of Mathematical Sciences, Tsinghua University, Beijing 100084, China

Journal of Uncertainty Analysis and Applications 2013, 1:1  doi:10.1186/2195-5468-1-1

Published: 24 April 2013

Abstract

This paper first introduces a paradox of stochastic finance theory that shows the real stock price is impossible to follow any Ito’s stochastic differential equation. After a survey on uncertainty theory, uncertain process, uncertain calculus, and uncertain differential equation, this paper discusses some possible applications of uncertain differential equations to financial markets. Finally, it is suggested that a new uncertain finance theory should be developed based on uncertainty theory and uncertain differential equation.

Keywords:
Finance; Uncertainty theory; Uncertain process; Uncertain calculus; Uncertain differential equation