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Dynamic programming for stochastic target problems, Viscosity solutions and hedging in markets with Portfolio constraints and large investors

Author

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  • Rafael Serrano

Abstract

The purpose of this expository article is to present a self-contained overview of some results on the characterization of the optimal value function of a stochastic target problem as (discontinuous) viscosity solution of a certain dynamic programming PDE and its application to the problem of hedging contingent claims in the presence of portfolio constraints and large investors.

Suggested Citation

  • Rafael Serrano, 2014. "Dynamic programming for stochastic target problems, Viscosity solutions and hedging in markets with Portfolio constraints and large investors," Documentos de Trabajo 12233, Universidad del Rosario.
    • Handle: RePEc:col:000092:012233
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    File URL: http://repository.urosario.edu.co/bitstream/handle/10336/11006/12233.pdf
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    More about this item

    Keywords

    Stohastitarget problem; dynamiprogramming priniple; visosity solution; Hamilton-Jaobi-Bellman equation; super-repliation; large investor; portfolioonstraints;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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