BSDEs driven by cylindrical martingales with application to approximate hedging in bond markets

Yushi Hamaguchi

Papers from arXiv.org

Abstract: We consider Lipschitz-type backward stochastic differential equations (BSDEs) driven by cylindrical martingales on the space of continuous functions. We show the existence and uniqueness of the solution of such infinite-dimensional BSDEs and prove that the sequence of solutions of corresponding finite-dimensional BSDEs approximates the original solution. We also consider the hedging problem in bond markets and prove that, for an approximately attainable contingent claim, the sequence of locally risk-minimizing strategies based on small markets converges to the generalized hedging strategy.

Date: 2018-06
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Published in Japan J. Indust. Appl. Math., 38, pp:425--453 (2021)

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