Existence, minimality and approximation of solutions to BSDEs with convex drivers
Abstract
We study the existence of solutions to backward stochastic differential equations with drivers f(t,W,y,z) that are convex in z. We assume f to be Lipschitz in y and W but do not make growth assumptions with respect to z. We first show the existence of a unique solution (Y,Z) with bounded Z if the terminal condition is Lipschitz in W and that it can be approximated by the solutions to properly discretized equations. If the terminal condition is bounded and uniformly continuous in W, we show the existence of a minimal continuous supersolution by uniformly approximating the terminal condition with Lipschitz terminal conditions. Finally, we prove existence of a minimal RCLL supersolution for bounded lower semicontinuous terminal conditions by approximating the terminal condition pointwise from below with Lipschitz terminal conditions.
Keywords
Cite
@article{arxiv.1105.1471,
title = {Existence, minimality and approximation of solutions to BSDEs with convex drivers},
author = {Patrick Cheridito and Mitja Stadje},
journal= {arXiv preprint arXiv:1105.1471},
year = {2011}
}