Minimal supersolutions for BSDEs with singular terminal condition and application to optimal position targeting

T. Kruse and A. Popier

Stochastic Processes and their Applications, 2016, vol. 126, issue 9, 2554-2592

Abstract: We study the existence of a minimal supersolution for backward stochastic differential equations when the terminal data can take the value +∞ with positive probability. We deal with equations on a general filtered probability space and with generators satisfying a general monotonicity assumption. With this minimal supersolution we then solve an optimal stochastic control problem related to portfolio liquidation problems. We generalize the existing results in three directions: firstly there is no assumption on the underlying filtration (except completeness and quasi-left continuity), secondly we relax the terminal liquidation constraint and finally the time horizon can be random.

Keywords: Backward stochastic differential equations; Singular terminal condition; Stochastic control with constraints (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (17)

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DOI: 10.1016/j.spa.2016.02.010

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