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research article
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 solutions 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 It process setting.
Type
research article
Web of Science ID
WOS:000290725200008
Authors
Publication date
2011
Published in
Volume
150
Start page
219
End page
255
Peer reviewed
REVIEWED
EPFL units
Available on Infoscience
December 16, 2011
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