Journal Article10.1111/1467-9965.00022
Backward Stochastic Differential Equations in Finance
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TL;DR: In this article, different properties of backward stochastic differential equations and their applications to finance are discussed. But the main focus of this paper is on the theory of contingent claim valuation, especially cases with constraints.
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Abstract: We are concerned with different properties of backward stochastic differential equations and their applications to finance. These equations, first introduced by Pardoux and Peng (1990), are useful for the theory of contingent claim valuation, especially cases with constraints and for the theory of recursive utilities, introduced by Duffie and Epstein (1992a, 1992b).
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Stochastic differential utility
TL;DR: In this article, a stochastic differential formulation of recursive utility is given sufficient conditions for existence, uniqueness, time consistency, monotonicity, continuity, risk aversion, concavity, and other properties.