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arXiv · 1806.04025

BSDEs driven by cylindrical martingales with application to approximate hedging in bond markets

Yushi Hamaguchi
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Abstract

We consider Lipschitz-type backward stochastic differential equations (BSDEs) driven by cylindrical martingales on the space of continuous functions. We show the existence and uniqueness of the solution of such infinite-dimensional BSDEs and prove that the sequence of solutions of corresponding finite-dimensional BSDEs approximates the original solution. We also consider the hedging problem in bond markets and prove that, for an approximately attainable contingent claim, the sequence of locally risk-minimizing strategies based on small markets converges to the generalized hedging strategy.

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Yushi Hamaguchi. 2018-06-11. BSDEs driven by cylindrical martingales with application to approximate hedging in bond markets. https://doi.org/10.1007/s13160-020-00442-y

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