Abstract
This paper investigates some important properties of Z, the martingale integrant of the backward stochastic differential equations, which is the second process of the solution. These include the backward stochastic viability property, bounded property and the comparison theorem. To explain the theoretical results, the authors apply them to study a financial contingent claim pricing problem. The replication portfolio process can be characterized clearly.
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This research is supported by the National Natural Science Foundation of China under Grant Nos. 10921101, 61174092, 11026185 and 11101242, the National Science Foundation for Distinguished Young Scholars of China under Grant No. 11125102, the Natural Science Foundation of Shandong Province, China under Grant No. ZR2010AQ004, and the Independent Innovation Foundation of Shandong University under Grant No. 2009TS036.
This paper was recommended for publication by Editor Jifeng ZHANG.
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Wu, Z., Yu, Z. Backward stochastic viability and related properties on Z for BSDEs with applications. J Syst Sci Complex 25, 675–690 (2012). https://doi.org/10.1007/s11424-012-0083-8
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DOI: https://doi.org/10.1007/s11424-012-0083-8