Economy – Quantitative Finance – Computational Finance
Scientific paper
2008-11-25
Le bulletin fran\c{c}ais d'actuariat 20, 10 (2010) http://www.institutdesactuaires.com/bfa/
Economy
Quantitative Finance
Computational Finance
Scientific paper
This article focuses on the mathematical problem of existence and uniqueness of BSDE with a random terminal time which is a general random variable but not a stopping time, as it has been usually the case in the previous literature of BSDE with random terminal time. The main motivation of this work is a financial or actuarial problem of hedging of defaultable contingent claims or life insurance contracts, for which the terminal time is a default time or a death time, which are not stopping times. We have to use progressive enlargement of the Brownian filtration, and to solve the obtained BSDE under this enlarged filtration. This work gives a solution to the mathematical problem and proves the existence and uniqueness of solutions of such BSDE under certain general conditions. This approach is applied to the financial problem of hedging of defaultable contingent claims, and an expression of the hedging strategy is given for a defaultable contingent claim or a life insurance contract.
Blanchet-Scalliet Christophette
Eyraud-Loisel Anne
Royer-Carenzi Manuela
No associations
LandOfFree
Hedging of Defaultable Contingent Claims using BSDE with uncertain time horizon does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with Hedging of Defaultable Contingent Claims using BSDE with uncertain time horizon, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Hedging of Defaultable Contingent Claims using BSDE with uncertain time horizon will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-304214