A System of BSDEs with Singular Terminal Values Arising in Optimal Liquidation with Regime Switching
Mathematical Finance
2025-01-22 v2 Optimization and Control
Probability
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.
Cite
@article{arxiv.2412.19058,
title = {A System of BSDEs with Singular Terminal Values Arising in Optimal Liquidation with Regime Switching},
author = {Guanxing Fu and Xiaomin Shi and Zuo Quan Xu},
journal= {arXiv preprint arXiv:2412.19058},
year = {2025}
}
Comments
19 pages