IMPROVEMENT ON OPERATOR AXIOMS AND FUNDAMENTAL OPERATOR FUNCTIONS
The Operator axioms have been contructed to deduce number systems. In this paper, we slightly improve on the syntax of the Operator axioms and construct a semantics of the Operator axioms. Then on the basis of the improved Operator axioms, we define two fundamental operator functions to study the analytic properties of the Operator axioms. Finally, we prove two theorems about the fundamental operator functions and pose some conjectures. Real operators can give new equations and inequalities so as to precisely describe the relation of mathematical objects or scientific objects.
For a large class of vanilla contingent claims, we establish an explicit F\"ollmer-Schweizer decomposition when the underlying is a process with independent increments (PII) and an exponential of a PII process. This allows to provide an efficient algorithm for solving the mean variance hedging problem. Applications to models derived from the electricity market are performed.