Backward Stochastic Differential Equations in Finance |
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| Authors: | N El Karoui S Peng & M C Quenez |
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| Institution: | Laboratoire de Probabilités, CNRS–URA 224, Universitéde Paris VI, Paris, France,;Institute of Mathematics, Shandong University, Jinan, China,;Equipe de Mathématiques, Universitéde Marne la Vallée, Noisy–Le–Grand, France |
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| Abstract: | We are concerned with different properties of backward stochastic differential equations and their applications to finance. These equations, first introduced by Pardoux and Peng (1990), are useful for the theory of contingent claim valuation, especially cases with constraints and for the theory of recursive utilities, introduced by Duffie and Epstein (1992a, 1992b). |
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| Keywords: | backward stochastic equation mathematical finance pricing hedging portfolios incomplete market constrained portfolio recursive utility stochastic control viscosity solution of PDE Malliavin derivative |
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