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Backward stochastic difference equations on lattices with application to market equilibrium analysis

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  • Masaaki Fukasawa
  • Takashi Sato
  • Jun Sekine

Abstract

We study backward stochastic difference equations (BS{\Delta}E) driven by a d-dimensional stochastic process on a lattice whose increments have only d + 1 possible values that generates the lattice. Regarding the driving process as a d dimensional asset price process, we give applications to an optimal investment problem and a market equilibrium analysis, where utility functionals are defined through BS{\Delta}E.

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  • Masaaki Fukasawa & Takashi Sato & Jun Sekine, 2023. "Backward stochastic difference equations on lattices with application to market equilibrium analysis," Papers 2312.10883, arXiv.org.
    • Handle: RePEc:arx:papers:2312.10883
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    References listed on IDEAS

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