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Reflected backward stochastic differential equations and a class of non linear dynamic pricing rule

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  • Marie-Amelie Morlais

Abstract

In that paper, we provide a new characterization of the solutions of specific reflected backward stochastic differential equations (or RBSDEs) whose driver $g$ is convex and has quadratic growth in its second variable: this is done by introducing the extended notion of $g$-Snell enveloppe. Then, in a second step, we relate this representation to a specific class of dynamic monetary concave functionals already introduced in a discrete time setting. This connection implies that the solution, characterized by means of non linear expectations, has again the time consistency property.

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  • Marie-Amelie Morlais, 2008. "Reflected backward stochastic differential equations and a class of non linear dynamic pricing rule," Papers 0802.2172, arXiv.org, revised May 2008.
    • Handle: RePEc:arx:papers:0802.2172
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    File URL: http://arxiv.org/pdf/0802.2172
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    References listed on IDEAS

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    1. Jocelyne Bion-Nadal, 2007. "Bid-Ask Dynamic Pricing in Financial Markets with Transaction Costs and Liquidity Risk," Papers math/0703074, arXiv.org.
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