An ergodic BSDE approach to forward entropic risk measures: representation and large-maturity behavior

Wing Fung Chong; Ying Hu; Gechun Liang; Thaleia Zariphopoulou

doi:10.1007/s00780-018-0377-3

An ergodic BSDE approach to forward entropic risk measures: representation and large-maturity behavior

Wing Fung Chong, Ying Hu, Gechun Liang, Thaleia Zariphopoulou

Research output: Contribution to journal › Article › peer-review

Abstract

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.

Original language	English (US)
Pages (from-to)	239-273
Number of pages	35
Journal	Finance and Stochastics
Volume	23
Issue number	1
DOIs	https://doi.org/10.1007/s00780-018-0377-3
State	Published - Jan 15 2019

Keywords

Convex duality representation
Ergodic BSDE
Forward entropic risk measures
Large-maturity behavior
Stochastic factor models

ASJC Scopus subject areas

Statistics and Probability
Finance
Statistics, Probability and Uncertainty

Online availability

10.1007/s00780-018-0377-3

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abstract = "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.",

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AU - Zariphopoulou, Thaleia

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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An ergodic BSDE approach to forward entropic risk measures: representation and large-maturity behavior

Abstract

Keywords

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