Stability and analytic expansions of local solutions of systems of quadratic BSDEs with applications to a price impact model

Dmitry Kramkov () and Sergio Pulido ()
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Dmitry Kramkov: CMU - Carnegie Mellon University [Pittsburgh]
Sergio Pulido: ENSIIE - Ecole Nationale Supérieure d'Informatique pour l'Industrie et l'Entreprise, LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - INRA - Institut National de la Recherche Agronomique - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: We obtain stability estimates and derive analytic expansions for local solutions of multi-dimensional quadratic BSDEs. We apply these results to a financial model where the prices of risky assets are quoted by a representative dealer in such a way that it is optimal to meet an exogenous demand. We show that the prices are stable under the demand process and derive their analytic expansions for small risk aversion coefficients of the dealer.

Keywords: multi-dimensional quadratic BSDEs; stability of quadratic BSDEs; asymptotic behavior of quadratic BSDEs; liquidity; price impact (search for similar items in EconPapers)
Date: 2016-08-16
Note: View the original document on HAL open archive server: https://hal.science/hal-01181147v3
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Citations: View citations in EconPapers (5)

Published in SIAM Journal on Financial Mathematics, 2016, 7 (1), pp.567-587

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01181147

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