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Reflected BSDEs and robust optimal stopping for dynamic risk measures with jumps

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  • Quenez, Marie-Claire
  • Sulem, Agnès

Abstract

We study the optimal stopping problem for dynamic risk measures represented by Backward Stochastic Differential Equations (BSDEs) with jumps and its relation with reflected BSDEs (RBSDEs). The financial position is given by an RCLL adapted process. We first state some properties of RBSDEs with jumps when the obstacle process is RCLL only. We then prove that the value function of the optimal stopping problem is characterized as the solution of an RBSDE. The existence of optimal stopping times is obtained when the obstacle is left-upper semi-continuous along stopping times. Finally, we investigate robust optimal stopping problems related to the case with model ambiguity and their links with mixed control/optimal stopping game problems. We prove that, under some hypothesis, the value function is equal to the solution of an RBSDE. We then study the existence of saddle points when the obstacle is left-upper semi-continuous along stopping times.

Suggested Citation

  • Quenez, Marie-Claire & Sulem, Agnès, 2014. "Reflected BSDEs and robust optimal stopping for dynamic risk measures with jumps," Stochastic Processes and their Applications, Elsevier, vol. 124(9), pages 3031-3054.
    • Handle: RePEc:eee:spapps:v:124:y:2014:i:9:p:3031-3054
    DOI: 10.1016/j.spa.2014.04.007
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    References listed on IDEAS

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    1. Bayraktar, Erhan & Yao, Song, 2011. "Optimal stopping for non-linear expectations--Part I," Stochastic Processes and their Applications, Elsevier, vol. 121(2), pages 185-211, February.
    2. Jocelyne Bion-Nadal, 2008. "Dynamic risk measures: Time consistency and risk measures from BMO martingales," Finance and Stochastics, Springer, vol. 12(2), pages 219-244, April.
    3. Erhan Bayraktar & Song Yao, 2009. "Optimal Stopping for Non-linear Expectations," Papers 0905.3601, arXiv.org, revised Jan 2011.
    4. Quenez, Marie-Claire & Sulem, Agnès, 2013. "BSDEs with jumps, optimization and applications to dynamic risk measures," Stochastic Processes and their Applications, Elsevier, vol. 123(8), pages 3328-3357.
    5. Royer, Manuela, 2006. "Backward stochastic differential equations with jumps and related non-linear expectations," Stochastic Processes and their Applications, Elsevier, vol. 116(10), pages 1358-1376, October.
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    Cited by:

    1. Grigorova, Miryana & Quenez, Marie-Claire & Sulem, Agnès, 2021. "American options in a non-linear incomplete market model with default," Stochastic Processes and their Applications, Elsevier, vol. 142(C), pages 479-512.
    2. Miryana Grigorova & Marie-Claire Quenez, 2017. "Optimal stopping and a non-zero-sum Dynkin game in discrete time with risk measures induced by BSDEs," Papers 1705.03724, arXiv.org.
    3. Grigorova, Miryana & Imkeller, Peter & Ouknine, Youssef & Quenez, Marie-Claire, 2020. "Optimal stopping with f-expectations: The irregular case," Stochastic Processes and their Applications, Elsevier, vol. 130(3), pages 1258-1288.
    4. Libo Li & Ruyi Liu & Marek Rutkowski, 2022. "Vulnerable European and American Options in a Market Model with Optional Hazard Process," Papers 2212.12860, arXiv.org.
    5. Ihsan Arharas & Siham Bouhadou & Youssef Ouknine, 2022. "Doubly Reflected Backward Stochastic Differential Equations in the Predictable Setting," Journal of Theoretical Probability, Springer, vol. 35(1), pages 115-141, March.
    6. Roxana Dumitrescu & Marie-Claire Quenez & Agn`es Sulem, 2015. "Game options in an imperfect market with default," Papers 1511.09041, arXiv.org, revised Jul 2017.
    7. Miryana Grigorova & Marie-Claire Quenez, 2017. "Optimal stopping and a non-zero-sum Dynkin game in discrete time with risk measures induced by BSDEs," Post-Print hal-01519215, HAL.
    8. Miryana Grigorova & Marie-Claire Quenez & Agnès Sulem, 2019. "American options in a non-linear incomplete market model with default," Working Papers hal-02025835, HAL.
    9. Klimsiak, Tomasz, 2021. "Non-semimartingale solutions of reflected BSDEs and applications to Dynkin games," Stochastic Processes and their Applications, Elsevier, vol. 134(C), pages 208-239.
    10. Miryana Grigorova & Marie-Claire Quenez & Agnès Sulem, 2021. "American options in a non-linear incomplete market model with default," Post-Print hal-02025835, HAL.
    11. Grigorova, Miryana & Imkeller, Peter & Quenez, Marie-Claire & Ouknine, Youssef, 2018. "Doubly Reflected BSDEs and $\mathcal{E}$$^ƒ$-Dynkin games: beyond the right-continuous case," Center for Mathematical Economics Working Papers 598, Center for Mathematical Economics, Bielefeld University.
    12. Kim, Mun-Chol & O, Hun, 2021. "A general comparison theorem for reflected BSDEs," Statistics & Probability Letters, Elsevier, vol. 173(C).
    13. Grigorova, Miryana & Quenez, Marie-Claire & Sulem, Agnès, 2019. "Superhedging prices of European and American options in a non-linear incomplete market with default," Center for Mathematical Economics Working Papers 607, Center for Mathematical Economics, Bielefeld University.
    14. Roxana Dumitrescu & Marie-Claire Quenez & Agnès Sulem, 2015. "Optimal Stopping for Dynamic Risk Measures with Jumps and Obstacle Problems," Journal of Optimization Theory and Applications, Springer, vol. 167(1), pages 219-242, October.

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