Backward SDEs

Jakša Cvitanić and Jianfeng Zhang
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Jakša Cvitanić: California Institute of Technology
Jianfeng Zhang: University of Southern California

Chapter Chapter 9 in Contract Theory in Continuous-Time Models, 2013, pp 157-182 from Springer

Abstract: Abstract In this chapter we first introduce Backward SDEs by means of a popular application, option pricing and hedging. We show how these problems lead naturally to BSDEs, and then, we provide the basic theory. We present the important Comparison Theorem for BSDEs. Existence and uniqueness are first shown under Lipschitz and square-integrability conditions. Then, the case of quadratic growth is studied, often encountered in applications. In Markovian models a connection to PDEs is established, which can be useful for numerical solutions.

Keywords: Option Price; Risky Asset; Quadratic Growth; European Call Option; Riskless Asset (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprfcp:978-3-642-14200-0_9

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DOI: 10.1007/978-3-642-14200-0_9

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