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An ergodic BSDE approach to forward entropic risk measures: representation and large-maturity behavior

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  • Wing Fung Chong
  • Ying Hu
  • Gechun Liang
  • Thaleia Zariphopoulou

Abstract

Using elements from the theory of ergodic backward stochastic differential equations (BSDE), we study the behavior of forward entropic risk measures. We provide their general representation results (via both BSDE and convex duality) and examine their behavior for risk positions of long maturities. We show that forward entropic risk measures converge to some constant exponentially fast. We also compare them with their classical counterparts and derive a parity result.

Suggested Citation

  • Wing Fung Chong & Ying Hu & Gechun Liang & Thaleia Zariphopoulou, 2016. "An ergodic BSDE approach to forward entropic risk measures: representation and large-maturity behavior," Papers 1607.02289, arXiv.org, revised Apr 2017.
  • Handle: RePEc:arx:papers:1607.02289
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    References listed on IDEAS

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