Work

Systems of Ergodic BSDEs Arising in Regime Switching Forward Performance Processes

Year: 2020

Type: article

Abstract: We introduce and solve a new type of quadratic backward stochastic differential equation (BSDE) systems defined in an infinite time horizon, called ergodic BSDE systems. Such systems arise naturally as candidate solutions to characterize forward performance processes and their associated optimal trading strategies in a regime switching market. In addition, we develop a connection between the solution of the ergodic BSDE system and the long-term growth rate of classical utility maximization problems, and use the ergodic BSDE system to study the large time behavior of PDE systems with quadratic growth Hamiltonians.

Source: SIAM Journal on Control and Optimization

DOI: 10.1137/18m1234783

Authors: Ying Hu, Gechun Liang, Shanjian Tang

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: Royal Society, Agence Nationale de la Recherche, National Natural Science Foundation of China, National Key Research and Development Program of China

Awards: G30813534, Mean Field Games, Centre de Mathématiques Henri Lebesgue : fondements, interactions, applications et Formation, Control and simulAtion of Electrical Systems, interAction and RobustnesS, G7323191876, G7802776144, G7854521768

OpenAlex ID: W2902207574

FWCI: 2.598

Cites: 48

Cited by: 21

Related to: 10