# A Risk-Neutral Equilibrium Leading to Uncertain Volatility Pricing

arXiv: https://arxiv.org/abs/1612.09152 · HTML: https://mlsanity.com/paper/1612.09152/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 29 Dec 2016.

## Built on by (most cited first, 1 of 1)

- [Uncertainty-Aware Strategies: A Model-Agnostic Framework for Robust Financial Optimization through Subsampling](https://mlsanity.com/paper/2506.07299/) (2025)

## Abstract (arXiv)

We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a unique equilibrium price and show that it incorporates the speculative value of possibly reselling the derivative. This value typically leads to a bubble; that is, the price exceeds the autonomous valuation of any given agent. Mathematically, the equilibrium price operator is of the same nonlinear form that is obtained in single-agent settings with strong aversion against model uncertainty. Thus, our equilibrium leads to a novel interpretation of this price.