A CHANGE OF MEASURE FORMULA FOR RECURSIVE CONDITIONAL EXPECTATIONS
Luca Di Persio (),
Alessandro Gnoatto and
Marco Patacca ()
Additional contact information
Luca Di Persio: Department of Computer Science, University of Verona, via Ca’ Vignal 2 37129 Verona, Italy
Alessandro Gnoatto: Department of Economics, University of Verona, via Cantarane 24 37129 Verona, Italy
Marco Patacca: Department of Economics, University of Perugia, via A. Pascoli 20 06123 Perugia, Italy
International Journal of Theoretical and Applied Finance (IJTAF), 2024, vol. 27, issue 02, 1-23
Abstract:
We derive a representation for the value process associated to the solutions of forward–backward stochastic differential equations in a jump-diffusion setting under multiple probability measures. Motivated by concrete financial problems, the latter representations are then applied to devise a generalization of the change of numéraire technique, allowing to obtain recursive pricing formulas in the presence of nonlinear funding terms due to e.g. collateralization agreements.
Keywords: Pricing; change of measure; BSDE; recursive conditional expectation; nonlinear valuation (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024924500080
Access to full text is restricted to subscribers
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:27:y:2024:i:02:n:s0219024924500080
Ordering information: This journal article can be ordered from
DOI: 10.1142/S0219024924500080
Access Statistics for this article
International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston
More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().