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

T Kruse and A Popier
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T Kruse: LMM
A Popier: LMM

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Abstract: We study the existence of a minimal supersolution for backward stochastic differential equations when the terminal data can take the value +$\infty$ 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.

Date: 2015-04, Revised 2015-12
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