Monotone stability of quadratic semimartingales with applications to unbounded general quadratic BSDEs

DOI10.1214/12-AOP743zbMATH Open1312.60052arXiv1101.5282OpenAlexW2591655259MaRDI QIDQ373548FDOQ373548

Authors: Pauline Barrieu, Nicole El Karoui 

Publication date: 17 October 2013

Published in: The Annals of Probability (Search for Journal in Brave)

Abstract: In this paper, we study the stability and convergence of some general quadratic semimartingales. Motivated by financial applications, we study simultaneously the semimartingale and its opposite. Their characterization and integrability properties are obtained through some useful exponential submartingale inequalities. Then, a general stability result, including the strong convergence of the martingale parts in various spaces ranging from $mathbb{H}^1$ to BMO, is derived under some mild integrability condition on the exponential of the terminal value of the semimartingale. This can be applied in particular to BSDE-like semimartingales. This strong convergence result is then used to prove the existence of solutions of general quadratic BSDEs under minimal exponential integrability assumptions, relying on a regularization in both linear-quadratic growth of the quadratic coefficient itself. On the contrary to most of the existing literature, it does not involve the seminal result of Kobylanski (2000) on bounded solutions.

Full work available at URL: https://arxiv.org/abs/1101.5282

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zbMATH Keywords

inf-convolutionquadratic backward stochastic differential equationsstrong convergenceentropic inequalitiesBMO-martingalesexponential transformationmonotone stabilityquadratic semimartingales

Mathematics Subject Classification ID

Auctions, bargaining, bidding and selling, and other market models (91B26) Generalizations of martingales (60G48) Utility theory (91B16) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Martingales with continuous parameter (60G44) Stochastic analysis (60H99) General theory of stochastic processes (60G07)

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