Locally Lipschitz BSDE driven by a continuous martingale a path-derivative approach

DOI10.1016/J.SPA.2021.09.009zbMATH Open1480.60168arXiv1606.03836OpenAlexW3200072942MaRDI QIDQ2238894FDOQ2238894

Authors: Kihun Nam 

Publication date: 2 November 2021

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: Using a new notion of path-derivative, we study well-posedness of backward stochastic differential equation driven by a continuous martingale $M$ when $f(s,gamma,y,z)$ is locally Lipschitz in $(y,z)$: [Y_{t}=xi(M_{[0,T]})+int_{t}^{T}f(s,M_{[0,s]},Y_{s-},Z_{s}m_{s})d{ m tr}[M,M]_{s}-int_{t}^{T}Z_{s}dM_{s}-N_{T}+N_{t}] Here, $M_{[0,t]}$ is the path of $M$ from $0$ to $t$ and $m$ is defined by $[M,M{]}_t=in{t}_0^t{m}_s{m}_s^{\ast }dmtr[M,M{]}_s$. When the BSDE is one-dimensional, we could show the existence and uniqueness of solution. On the contrary, when the BSDE is multidimensional, we show existence and uniqueness only when $[M,M{]}_T$ is small enough: otherwise, we provide a counterexample that has blowing-up solution. Then, we investigate the applications to utility maximization problems.

Full work available at URL: https://arxiv.org/abs/1606.03836

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zbMATH Keywords

backward stochastic differential equationutility maximizationfunctional derivativecoefficients of superlinear growthpath differentiability

Mathematics Subject Classification ID

Stochastic calculus of variations and the Malliavin calculus (60H07) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Optimal stochastic control (93E20)

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Cited In (2)

• Path regularity for solutions of backward stochastic differential equations
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