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Partially informed investors: hedging in an incomplete market with default
- Source :
- J. Appl. Probab. 52, no. 3 (2015), 718-735
- Publication Year :
- 2015
- Publisher :
- Cambridge University Press (CUP), 2015.
-
Abstract
- In a defaultable market, an investor trades having only partial information about the behavior of the market. Taking into account the intraday stock movements, the risky asset prices are modelled by marked point processes. Their dynamics depend on an unobservable process, representing the amount of news reaching the market. This is a marked point process, which may have common jump times with the risky asset price processes. The problem of hedging a defaultable claim is studied. In order to discuss all these topics, in this paper we examine stochastic control problems using backward stochastic differential equations (BSDEs) and filtering techniques. The goal of this paper is to construct a sequence of functions converging to the value function, each of these is the unique solution of a suitable BSDE.
- Subjects :
- Statistics and Probability
exponential utility
General Mathematics
backward stochastic differential equation
93E11
01 natural sciences
default time
Unobservable
010104 statistics & probability
Stochastic differential equation
Order (exchange)
Bellman equation
Incomplete markets
Econometrics
49L20
Asset (economics)
0101 mathematics
Mathematics
dynamic programming
Stochastic control
Actuarial science
Optimal investment
010102 general mathematics
filtering
93E03
Exponential utility
Statistics, Probability and Uncertainty
Subjects
Details
- ISSN :
- 14756072 and 00219002
- Volume :
- 52
- Database :
- OpenAIRE
- Journal :
- Journal of Applied Probability
- Accession number :
- edsair.doi.dedup.....1bd4dc0bd585e45670d7c600a4b62eba