IDEAS home Printed from https://ideas.repec.org/a/eee/spapps/v130y2020i3p1669-1712.html
   My bibliography  Save this article

A stochastic approach to path-dependent nonlinear Kolmogorov equations via BSDEs with time-delayed generators and applications to finance

Author

Listed:
  • Cordoni, Francesco
  • Di Persio, Luca
  • Maticiuc, Lucian
  • Zălinescu, Adrian

Abstract

We prove the existence of a viscosity solution of the following path dependent nonlinear Kolmogorov equation: where ▪=C([0,T];Rd), (u(⋅,ϕ))t≔(u(t+θ,ϕ))θ∈[−δ,0] and Lu(t,ϕ)≔〈b(t,ϕ),∂xu(t,ϕ)〉+12Tr[σ(t,ϕ)σ∗(t,ϕ)∂xx2u(t,ϕ)].The result is obtained by a stochastic approach. More precisely, we prove a new type of nonlinear Feynman–Kac representation formula associated to a backward stochastic differential equation with time-delayed generator, which is of non-Markovian type. Applications to the large investor problem and risk measures via g–expectations are also provided.

Suggested Citation

  • Cordoni, Francesco & Di Persio, Luca & Maticiuc, Lucian & Zălinescu, Adrian, 2020. "A stochastic approach to path-dependent nonlinear Kolmogorov equations via BSDEs with time-delayed generators and applications to finance," Stochastic Processes and their Applications, Elsevier, vol. 130(3), pages 1669-1712.
    • Handle: RePEc:eee:spapps:v:130:y:2020:i:3:p:1669-1712
    DOI: 10.1016/j.spa.2019.05.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304414919303278
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.spa.2019.05.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Uwe Küchler & Eckhard Platen, 2007. "Time Delay and Noise Explaining Cyclical Fluctuations in Prices of Commodities," Research Paper Series 195, Quantitative Finance Research Centre, University of Technology, Sydney.
    2. Maticiuc, Lucian & Rascanu, Aurel, 2010. "A stochastic approach to a multivalued Dirichlet-Neumann problem," Stochastic Processes and their Applications, Elsevier, vol. 120(6), pages 777-800, June.
    3. N. El Karoui & S. Peng & M. C. Quenez, 1997. "Backward Stochastic Differential Equations in Finance," Mathematical Finance, Wiley Blackwell, vol. 7(1), pages 1-71, January.
    4. Delong, Lukasz & Imkeller, Peter, 2010. "On Malliavin's differentiability of BSDEs with time delayed generators driven by Brownian motions and Poisson random measures," Stochastic Processes and their Applications, Elsevier, vol. 120(9), pages 1748-1775, August.
    5. Rosazza Gianin, Emanuela, 2006. "Risk measures via g-expectations," Insurance: Mathematics and Economics, Elsevier, vol. 39(1), pages 19-34, August.
    6. Kazmerchuk, Yuriy & Swishchuk, Anatoliy & Wu, Jianhong, 2007. "The pricing of options for securities markets with delayed response," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 75(3), pages 69-79.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Freddy Delbaen & Shige Peng & Emanuela Rosazza Gianin, 2010. "Representation of the penalty term of dynamic concave utilities," Finance and Stochastics, Springer, vol. 14(3), pages 449-472, September.
    2. Bayraktar, Erhan & Yao, Song, 2011. "Optimal stopping for non-linear expectations--Part II," Stochastic Processes and their Applications, Elsevier, vol. 121(2), pages 212-264, February.
    3. Orimar Sauri, 2024. "Asymptotic Error Distribution of the Euler Scheme for Fractional Stochastic Delay Differential Equations with Additive Noise," Papers 2402.08513, arXiv.org.
    4. Bayraktar, Erhan & Yao, Song, 2015. "Doubly reflected BSDEs with integrable parameters and related Dynkin games," Stochastic Processes and their Applications, Elsevier, vol. 125(12), pages 4489-4542.
    5. Yan, Tingjin & Chiu, Mei Choi & Wong, Hoi Ying, 2023. "Portfolio liquidation with delayed information," Economic Modelling, Elsevier, vol. 126(C).
    6. Zhou, Qing & Ren, Yong, 2012. "Reflected backward stochastic differential equations with time delayed generators," Statistics & Probability Letters, Elsevier, vol. 82(5), pages 979-990.
    7. Erhan Bayraktar & Song Yao, 2009. "Optimal Stopping for Non-linear Expectations," Papers 0905.3601, arXiv.org, revised Jan 2011.
    8. Alessandro Calvia & Emanuela Rosazza Gianin, 2019. "Risk measures and progressive enlargement of filtration: a BSDE approach," Papers 1904.13257, arXiv.org, revised Mar 2020.
    9. Jana Bielagk & Arnaud Lionnet & Gonçalo dos Reis, 2015. "Equilibrium pricing under relative performance concerns," Working Papers hal-01245812, HAL.
    10. Nicole EL KAROUI & Claudia RAVANELLI, 2008. "Cash Sub-additive Risk Measures and Interest Rate Ambiguity," Swiss Finance Institute Research Paper Series 08-09, Swiss Finance Institute.
    11. Samuel N. Cohen & Robert J. Elliott, 2008. "Comparisons for backward stochastic differential equations on Markov chains and related no-arbitrage conditions," Papers 0810.0055, arXiv.org, revised Jan 2010.
    12. Tomasz R. Bielecki & Igor Cialenco & Tao Chen, 2014. "Dynamic Conic Finance via Backward Stochastic Difference Equations," Papers 1412.6459, arXiv.org, revised Dec 2014.
    13. Masaaki Fujii & Akihiko Takahashi, 2015. "Asymptotic Expansion for Forward-Backward SDEs with Jumps," Papers 1510.03220, arXiv.org, revised Sep 2018.
    14. Jiang, Long, 2009. "A necessary and sufficient condition for probability measures dominated by g-expectation," Statistics & Probability Letters, Elsevier, vol. 79(2), pages 196-201, January.
    15. Tangpi, Ludovic, 2019. "Concentration of dynamic risk measures in a Brownian filtration," Stochastic Processes and their Applications, Elsevier, vol. 129(5), pages 1477-1491.
    16. Antoon Pelsser & Mitja Stadje, 2014. "Time-Consistent And Market-Consistent Evaluations," Mathematical Finance, Wiley Blackwell, vol. 24(1), pages 25-65, January.
    17. Masaaki Fujii & Akihiko Takahashi, 2015. "Quadratic-exponential growth BSDEs with Jumps and their Malliavin's Differentiability," Papers 1512.05924, arXiv.org, revised Sep 2017.
    18. Fujii, Masaaki & Takahashi, Akihiko, 2018. "Quadratic–exponential growth BSDEs with jumps and their Malliavin’s differentiability," Stochastic Processes and their Applications, Elsevier, vol. 128(6), pages 2083-2130.
    19. Zhao, Guoqing, 2009. "Lenglart domination inequalities for g-expectations," Statistics & Probability Letters, Elsevier, vol. 79(22), pages 2338-2342, November.
    20. Nam, Kihun, 2021. "Locally Lipschitz BSDE driven by a continuous martingale a path-derivative approach," Stochastic Processes and their Applications, Elsevier, vol. 141(C), pages 376-411.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:spapps:v:130:y:2020:i:3:p:1669-1712. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/505572/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.