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On the robustness of backward stochastic differential equations

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  • Briand, Philippe
  • Delyon, Bernard
  • Mémin, Jean

Abstract

In this paper, we study the robustness of backward stochastic differential equations (BSDEs for short) w.r.t. the Brownian motion; more precisely, we will show that if Wn is a martingale approximation of a Brownian motion W then the solution to the BSDE driven by the martingale Wn converges to the solution of the classical BSDE, namely the BSDE driven by W. The particular case of the scaled random walks has been studied in Briand et al. (Electron. Comm. Probab. 6 (2001) 1). Here, we deal with a more general situation and we will not assume that the Wn has the predictable representation property: this yields an orthogonal martingale in the BSDE driven by Wn. As a byproduct of our result, we obtain the convergence of the "Euler scheme" for BSDEs corresponding to the case where Wn is a time discretization of W.

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  • Briand, Philippe & Delyon, Bernard & Mémin, Jean, 2002. "On the robustness of backward stochastic differential equations," Stochastic Processes and their Applications, Elsevier, vol. 97(2), pages 229-253, February.
    • Handle: RePEc:eee:spapps:v:97:y:2002:i:2:p:229-253
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    References listed on IDEAS

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    1. Jacod, J. & Memin, J. & Metivier, M., 1983. "On tightness and stopping times," Stochastic Processes and their Applications, Elsevier, vol. 14(2), pages 109-146, February.
    2. 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.
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    Cited by:

    1. Callegaro, Giorgia & Gnoatto, Alessandro & Grasselli, Martino, 2023. "A fully quantization-based scheme for FBSDEs," Applied Mathematics and Computation, Elsevier, vol. 441(C).
    2. Yao, Song, 2017. "Lp solutions of backward stochastic differential equations with jumps," Stochastic Processes and their Applications, Elsevier, vol. 127(11), pages 3465-3511.
    3. Zhang, Guichang, 2006. "Discretization of backward semilinear stochastic evolution equations," Stochastic Processes and their Applications, Elsevier, vol. 116(8), pages 1097-1126, August.
    4. Madan, Dilip & Pistorius, Martijn & Stadje, Mitja, 2016. "Convergence of BSΔEs driven by random walks to BSDEs: The case of (in)finite activity jumps with general driver," Stochastic Processes and their Applications, Elsevier, vol. 126(5), pages 1553-1584.
    5. Blessing, Jonas & Kupper, Michael & Nendel, Max, 2023. "Convergence of Infintesimal Generators and Stability of Convex Montone Semigroups," Center for Mathematical Economics Working Papers 680, Center for Mathematical Economics, Bielefeld University.
    6. Bender, Christian & Parczewski, Peter, 2018. "Discretizing Malliavin calculus," Stochastic Processes and their Applications, Elsevier, vol. 128(8), pages 2489-2537.
    7. Ismail Laachir & Francesco Russo, 2016. "BSDEs, càdlàg martingale problems and orthogonalisation under basis risk," Working Papers hal-01086227, HAL.
    8. Ceci, Claudia & Cretarola, Alessandra & Russo, Francesco, 2014. "BSDEs under partial information and financial applications," Stochastic Processes and their Applications, Elsevier, vol. 124(8), pages 2628-2653.
    9. Cheridito, Patrick & Stadje, Mitja, 2012. "Existence, minimality and approximation of solutions to BSDEs with convex drivers," Stochastic Processes and their Applications, Elsevier, vol. 122(4), pages 1540-1565.
    10. Christoph Czichowsky, 2012. "Time-Consistent Mean-Variance Portfolio Selection in Discrete and Continuous Time," Papers 1205.4748, arXiv.org.
    11. Christoph Czichowsky, 2013. "Time-consistent mean-variance portfolio selection in discrete and continuous time," Finance and Stochastics, Springer, vol. 17(2), pages 227-271, April.
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    13. Geiss, Christel & Labart, Céline, 2016. "Simulation of BSDEs with jumps by Wiener Chaos expansion," Stochastic Processes and their Applications, Elsevier, vol. 126(7), pages 2123-2162.

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