Classical solutions to reaction-diffusion systems for hedging problems with interacting Ito and point processes

Dirk Becherer and Martin Schweizer

Papers from arXiv.org

Abstract: We use probabilistic methods to study classical solutions for systems of interacting semilinear parabolic partial differential equations. In a modeling framework for a financial market with interacting Ito and point processes, such PDEs are shown to provide a natural description for the solution of hedging and valuation problems for contingent claims with a recursive payoff structure.

Date: 2005-05
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Citations: View citations in EconPapers (22)

Published in Annals of Applied Probability 2005, Vol. 15, No. 2, 1111-1144

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