Work

A class of globally solvable Markovian quadratic BSDE systems and applications

Year: 2018

Type: article

Abstract: We establish existence and uniqueness for a wide class of Markovian systems of backward stochastic differential equations (BSDE) with quadratic nonlinearities. This class is characterized by an abstract structural assumption on the generator, an a priori local-boundedness property, and a locally-Hölder-continuous terminal condition. We present easily verifiable sufficient conditions for these assumptions and treat several applications, including stochastic equilibria in incomplete financial markets, stochastic differential games and martingales on Riemannian manifolds.

Source: The Annals of Probability

DOI: 10.1214/17-aop1190

Authors: Hao Xing, Gordan Žitković

Institutions: The University of Texas at Austin, London School of Economics and Political Science

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

Funder: National Science Foundation

Awards: Collaborative Research: RNMS: Kinetic Description of Emerging Challenges in Multiscale Problems of Natural Sciences, G5930628116, Stochastic Equilibria and Related Topics in Financial Mathematics