On the Solution of Locally Lipschitz BSDE Associated to Jump Markov Process

K. Abdelhadi; N. Khelfallah

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arXiv · 1812.09723

On the Solution of Locally Lipschitz BSDE Associated to Jump Markov Process

K. Abdelhadi·N. Khelfallah

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Abstract

In this study, we consider a class of backward SDE driven by jump Markov process. An existence and uniqueness result to this kind of equations is obtained in a locally Lipschitz case. We essentially approximate the initial problem by constructing a convenient sequence of globally Lipschitz BSDEs having the existence and the uniqueness propriety. Then, we show, by passing to the limits, the existence, and uniqueness of a solution to the initial problem. After that, a stability theorem is also proved in the local Lipschitz setting. Applying the aforementioned result, we give an application to European option pricing with constraint.

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BibTeX RIS

K. Abdelhadi, N. Khelfallah. 2018-12-23. On the Solution of Locally Lipschitz BSDE Associated to Jump Markov Process. https://arxiv.org/abs/1812.09723

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