Translator Disclaimer
September 2015 Partially informed investors: hedging in an incomplete market with default
P. Tardelli
Author Affiliations +
J. Appl. Probab. 52(3): 718-735 (September 2015). DOI: 10.1239/jap/1445543842

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.

Citation

Download Citation

P. Tardelli. "Partially informed investors: hedging in an incomplete market with default." J. Appl. Probab. 52 (3) 718 - 735, September 2015. https://doi.org/10.1239/jap/1445543842

Information

Published: September 2015
First available in Project Euclid: 22 October 2015

zbMATH: 1345.49045
MathSciNet: MR3414987
Digital Object Identifier: 10.1239/jap/1445543842

Subjects:
Primary: 49L20
Secondary: 93E03 , 93E11

Keywords: backward stochastic differential equation , default time , dynamic programming , exponential utility , Filtering , optimal investment

Rights: Copyright © 2015 Applied Probability Trust

JOURNAL ARTICLE
18 PAGES

This article is only available to subscribers.
It is not available for individual sale.
+ SAVE TO MY LIBRARY

SHARE
Vol.52 • No. 3 • September 2015
Back to Top