It is well known that backward stochastic differential equations (BSDEs) stem from the study on the Pontryagin type maximum principle for optional stochastic control. A solution of a BSDE hits a given terminal value (which is a random variable) by virtue of an additional martingale term and an...

Asset price processes are completely described by information processes and investor´s preferences. In this paper we derive the relationship between the process of investor´s expectations ofthe terminal stock price and asset prices in a general continuous time pricing kernel framework. To...

The existence of an adapted solution to a backward stochastic differential equation which is not adapted to the filtration of the underlying Brownian motion is proved. This result is applied to the pricing of contingent claims. It allows to compare the prices of agents who have different...

We obtain the global existence and uniqueness result for a one-dimensional back- ward stochastic Riccati equation, whose generator contains a quadratic term of L (the second unknown component). This solves the one-dimensional case of Bismut- Peng's problem which was initially proposed by Bismut...

We review the relations between adjoints of stochastic control problems with the derivative of the value function, and the latter with the value function of a stopping problem. These results are applied to the pricing of contingent claims.

In both complete and incomplete markets we consider the problem of fulfilling a financial obligation xc as well as possible at time T if the initial capital is not sufficient to hedge xc. This introduces a new risk into the market and our main aim is to minimize this shortfall risk by making use...

Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor...

We propose a novel statistic to test the rank of a matrix. The rank statistic overcomes deficiencies of existing rank statistics, like: a Kronecker covariance matrix for the canonical correlation rank statistic of Anderson [Annals of Mathematical Statistics (1951), 22, 327–351] sensitivity to...

The linear Gaussian state space model for which the common variance istreated as a stochastic time-varying variable is considered for themodelling of economic time series. The focus of this paper is on thesimultaneous estimation of parameters related to the stochasticprocesses of the mean part...

Various plants and resources such as orchards are vulnerable to the detrimental effects of successful invasions by alien animal or plant species. To outline an appropriate policy response, we first use renewal theory to construct a stochastic model of optimal orchard management in the presence...