Constrained Backward SDEs with Jumps: Application to Optimal Switching

Elie, Romuald; Kharroubi, Idris

Elie, Romuald; Kharroubi, Idris (2009), Constrained Backward SDEs with Jumps: Application to Optimal Switching. https://basepub.dauphine.fr/handle/123456789/3136

Type

Document de travail / Working paper

Date

2009

Series title

Université Paris-Dauphine

Published in

Paris

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Author(s)

Elie, Romuald
Kharroubi, Idris

Abstract (EN)

In this paper, we introduce a new class of BSDE generalizing and offering a unifying framework to represent the constrained ones presented in [16] or [12] as well as the oblique reflected ones studied by [11] and [9]. Via a penalization procedure, we provide an existence and uniqueness result for this new class of so-called constrained BSDEs with jumps. Remarkably, these BSDEs appear to be very convenient to represent the solution to eventually non-Markovian switching problems. As a by-product, we enlarge the class of obliquely reflected BSDE's, allowing to represent switching problems with controlled underlined diffusion.

Subjects / Keywords

Reflected BSDE; Switching problems; BSDE with jumps; Constrained BSDE