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The reverse Hölder inequality for matrix-valued stochastic exponentials and applications to quadratic BSDE systems

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  • Jackson, Joe

Abstract

In this paper, we study the connections between three concepts — the reverse Hölder inequality for matrix-valued martingales, the well-posedness of linear BSDEs with unbounded coefficients, and the well-posedness of quadratic BSDE systems. In particular, we show that a linear BSDE with bmo coefficients is well-posed if and only if the stochastic exponential of a related matrix-valued martingale satisfies a reverse Hölder inequality. Furthermore, we give structural conditions under which these equivalent conditions are satisfied. Finally, we apply our results on linear equations to obtain global well-posedness results for two new classes of non-Markovian quadratic BSDE systems with special structure.

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  • Jackson, Joe, 2023. "The reverse Hölder inequality for matrix-valued stochastic exponentials and applications to quadratic BSDE systems," Stochastic Processes and their Applications, Elsevier, vol. 160(C), pages 1-32.
    • Handle: RePEc:eee:spapps:v:160:y:2023:i:c:p:1-32
    DOI: 10.1016/j.spa.2023.02.011
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    References listed on IDEAS

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    1. 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.
    2. Hu, Ying & Tang, Shanjian, 2016. "Multi-dimensional backward stochastic differential equations of diagonally quadratic generators," Stochastic Processes and their Applications, Elsevier, vol. 126(4), pages 1066-1086.
    3. Briand, Philippe & Elie, Romuald, 2013. "A simple constructive approach to quadratic BSDEs with or without delay," Stochastic Processes and their Applications, Elsevier, vol. 123(8), pages 2921-2939.
    4. Xing, Hao & Žitković, Gordan, 2018. "A class of globally solvable Markovian quadratic BSDE systems and applications," LSE Research Online Documents on Economics 73440, London School of Economics and Political Science, LSE Library.
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