Classical solutions to reaction-diffusion systems for hedging problems with interacting Ito and point processes
Probability
2008-12-10 v1 Computational Finance
Abstract
We use probabilistic methods to study classical solutions for systems of interacting semilinear parabolic partial differential equations. In a modeling framework for a financial market with interacting Ito and point processes, such PDEs are shown to provide a natural description for the solution of hedging and valuation problems for contingent claims with a recursive payoff structure.
Cite
@article{arxiv.math/0505208,
title = {Classical solutions to reaction-diffusion systems for hedging problems with interacting Ito and point processes},
author = {Dirk Becherer and Martin Schweizer},
journal= {arXiv preprint arXiv:math/0505208},
year = {2008}
}
Comments
Published at http://dx.doi.org/10.1214/105051604000000846 in the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)