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Solvability and numerical simulation of BSDEs related to BSPDEs with applications to utility maximization

Please always quote using this URN:urn:nbn:de:0296-matheon-7174
  • In this paper we study BSDEs arising from a special class of backward stochastic partial differential equations (BSPDEs) that is intimately related to utility maximization problems with respect to arbitrary utility functions. After providing existence and uniqueness we discuss the numerical realizability. Then we study utility maximization problems on incomplete financial markets whose dynamics are governed by continuous semimartingales. Adapting standard methods that solve the utility maximization problem using BSDEs, we give solutions for the portfolio optimization problem which involve the delivery of a liability at maturity. We illustrate our study by numerical simulations for selected examples. As a byproduct we prove existence of a solution to a very particular quadratic growth BSDE with unbounded terminal condition. This complements results on this topic obtained in [6,7,8].

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Metadaten
Author:Peter Imkeller, Anthony Réveillac, Jianing Zhang
URN:urn:nbn:de:0296-matheon-7174
Referee:Dirk Becherer
Document Type:Preprint, Research Center Matheon
Language:English
Date of first Publication:2010/06/10
Release Date:2010/06/10
Institute:Humboldt-Universität zu Berlin
Preprint Number:733
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