Singular forward-backward stochastic differential equations and emissions derivatives (Q1950264): Difference between revisions

The authors are interested in modelling \(CO_{2}\) emissions, and in particular the valuation \(CO_{2}\) emission allowances. For this they propose two forward-backward stochastic differential equations with singular terminal condition as models. They also provide a first order Taylor expansion and show how to numerically calibrate some of their models to be used in \(CO_{2}\) option pricing.