Convexity bounds for BSDE solutions, with applications to indiﬀerence valuation
We consider backward stochastic diﬀerential equations (BSDEs) with a particular quadratic generator and study the behaviour of their solu- tions when the probability measure is changed, the ﬁltration is shrunk, or the underlying probability space is transformed. Our main results are upper bounds for the solutions of the original BSDEs in terms of solutions to other BSDEs which are easier to solve. We illustrate our results by applying them to exponential utility indiﬀerence valuation in a multidimensional Itˆo process setting.
Record created on 2009-10-12, modified on 2016-08-08