AN ERGODIC BSDE RISK REPRESENTATION IN A JUMP-DIFFUSION FRAMEWORK

Calisto Guambe, Lesedi Mabitsela () and Rodwell Kufakunesu ()
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Calisto Guambe: Department of Mathematics and Applied Mathematics, University of Pretoria, Pretoria, 0002, South Africa
Lesedi Mabitsela: Department of Mathematics and Applied Mathematics, University of Pretoria, Pretoria, 0002, South Africa
Rodwell Kufakunesu: Department of Mathematics and Applied Mathematics, University of Pretoria, Pretoria, 0002, South Africa

International Journal of Theoretical and Applied Finance (IJTAF), 2021, vol. 24, issue 03, 1-28

Abstract: We consider the representation of forward entropic risk measures using the theory of ergodic backward stochastic differential equations in a jump-diffusion framework. Our paper can be viewed as an extension of the work considered by Chong et al. (2019) in the diffusion case. We also study the behavior of a forward entropic risk measure under jumps when a financial position is held for a longer maturity.

Keywords: Forward exponential performance; maturity independent risk measure; forward entropic risk measure; jump-diffusion; ergodic BSDEs; long-term maturity behavior (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0219024921500151

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