Backward stochastic difference equations on lattices with application to market equilibrium analysis
Probability
2026-01-14 v1 General Finance
Abstract
We study backward stochastic difference equations (BS{\Delta}E) driven by a d-dimensional stochastic process on a lattice whose increments have only d + 1 possible values that generates the lattice. Regarding the driving process as a d dimensional asset price process, we give applications to an optimal investment problem and a market equilibrium analysis, where utility functionals are defined through BS{\Delta}E.
Keywords
Cite
@article{arxiv.2312.10883,
title = {Backward stochastic difference equations on lattices with application to market equilibrium analysis},
author = {Masaaki Fukasawa and Takashi Sato and Jun Sekine},
journal= {arXiv preprint arXiv:2312.10883},
year = {2026}
}