Splitting multidimensional BSDEs and finding local equilibria

STOCHASTIC PROCESSES AND THEIR APPLICATIONS

卷:124

Article

Frei, Christoph

关键词: Multidimensional BSDE;    Quadratic generator;    Splitting BSDEs;    Relative performance;    Local equilibrium;   

DOI  :  10.1016/j.spa.2014.03.004

来源: Elsevier

【 摘 要 】

We introduce a new notion of local solution of backward stochastic differential equations (BSDEs) and prove that multidimensional quadratic BSDEs are locally but not globally solvable. Applied in a financial context on optimal investment, our results show that there exist local but no global equilibria when agents take both the absolute and the relative performance compared to their peers into account. (C) 2014 Elsevier B.V. All rights reserved.

【 授权许可】

Free