Type of Publication: | Contribution to a conference collection |
Author: | Kohlmann, Michael; Zhou, Xun Yu |
Year of publication: | 1999 |
Conference: | 1999 Conference on Decision and Control, Phoenix, AZ, USA |
Published in: | Proceedings of the 38th IEEE Conference on Decision and Control (Cat. No.99CH36304). - IEEE, 1999. - pp. 2384-2389. - ISBN 0-7803-5250-5 |
DOI (citable link): | https://dx.doi.org/10.1109/CDC.1999.831281 |
Summary: |
The paper attempts to explore the relationship between backward stochastic differential equations (BSDEs) and stochastic controls by interpreting a BSDE as some stochastic optimal control problem. The latter is solved in a closed form by the stochastic linear-quadratic (LQ) theory. The general result is then applied to the Black-Scholes model, where an optimal mean-variance hedging portfolio is obtained explicitly in terms of the option price. Finally, a modified model is investigated where the difference between the state and the expectation of the given terminal value at any time is taken into account.
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Subject (DDC): | 510 Mathematics |
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KOHLMANN, Michael, Xun Yu ZHOU, 1999. Backward stochastic differential equations and stochastic controls. 1999 Conference on Decision and Control. Phoenix, AZ, USA. In: Proceedings of the 38th IEEE Conference on Decision and Control (Cat. No.99CH36304). IEEE, pp. 2384-2389. ISBN 0-7803-5250-5. Available under: doi: 10.1109/CDC.1999.831281
@inproceedings{Kohlmann1999Backw-25846, title={Backward stochastic differential equations and stochastic controls}, year={1999}, doi={10.1109/CDC.1999.831281}, isbn={0-7803-5250-5}, publisher={IEEE}, booktitle={Proceedings of the 38th IEEE Conference on Decision and Control (Cat. No.99CH36304)}, pages={2384--2389}, author={Kohlmann, Michael and Zhou, Xun Yu} }