TY - JOUR
T1 - An ergodic BSDE approach to forward entropic risk measures
T2 - representation and large-maturity behavior
AU - Chong, Wing Fung
AU - Hu, Ying
AU - Liang, Gechun
AU - Zariphopoulou, Thaleia
N1 - Funding Information:
Wing Fung Chong was supported by start-up funds provided by the Department of Mathematics and Department of Statistics, University of Illinois at Urbana-Champaign. Ying Hu was partially supported by Lebesgue Center of Mathematics “Investissements d’avenir” program ANR-11-LABX-0020-01, by ANR CAESARS (Grant No. 15-CE05-0024) and by ANR MFG (Grant No. 16-CE40-0015-01). Gechun Liang was partially supported by Royal Society International Exchanges (Grant No. 170137).
Funding Information:
We thank the Editor, Associate Editor and two anonymous referees for their valuable comments and suggestions. This work was presented at the SIAM Conference on Financial Mathematics and Engineering, Austin, the 9th World Congress of the Bachelier Finance Society, New York, the 9th European Summer School in Financial Mathematics, Pushkin, and the 5th Berlin Workshop on Mathematical Finance for Young Researchers, Berlin. The authors thank the participants for fruitful comments.
Publisher Copyright:
© 2018, The Author(s).
PY - 2019/1/15
Y1 - 2019/1/15
N2 - Using elements from the theory of ergodic backward stochastic differential equations (BSDEs), we study the behavior of forward entropic risk measures in stochastic factor models. We derive general representation results (via both BSDEs and convex duality) and examine their asymptotic behavior for risk positions of large maturities. We also compare them with their classical counterparts and provide a parity result.
AB - Using elements from the theory of ergodic backward stochastic differential equations (BSDEs), we study the behavior of forward entropic risk measures in stochastic factor models. We derive general representation results (via both BSDEs and convex duality) and examine their asymptotic behavior for risk positions of large maturities. We also compare them with their classical counterparts and provide a parity result.
KW - Convex duality representation
KW - Ergodic BSDE
KW - Forward entropic risk measures
KW - Large-maturity behavior
KW - Stochastic factor models
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U2 - 10.1007/s00780-018-0377-3
DO - 10.1007/s00780-018-0377-3
M3 - Article
AN - SCOPUS:85058395040
SN - 0949-2984
VL - 23
SP - 239
EP - 273
JO - Finance and Stochastics
JF - Finance and Stochastics
IS - 1
ER -