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arXiv · 2412.19058

A System of BSDEs with Singular Terminal Values Arising in Optimal Liquidation with Regime Switching

Guanxing Fu·Xiaomin Shi·Zuo Quan Xu
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Abstract

We study a stochastic control problem with regime switching arising in an optimal liquidation problem with dark pools and multiple regimes. The new feature of this model is that it introduces a system of BSDEs with jumps and with singular terminal values, which appears in literature for the first time. The existence result for this system is obtained. As a result, we solve the stochastic control problem with regime switching. More importantly, the uniqueness result of this system is also obtained, in contrast to merely minimal solutions established in most related literature.

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Guanxing Fu, Xiaomin Shi, Zuo Quan Xu. 2024-12-26. A System of BSDEs with Singular Terminal Values Arising in Optimal Liquidation with Regime Switching. https://arxiv.org/abs/2412.19058

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