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Special Semester on Stochastics with Emphasis on Finance
Linz, September 2008 - December 2008
Presentation: Market illiquidity and dual formulation of target problems

Workshop: Optimization and Optimal Control

Time: Wed, October 22, 2008, 16:20-17:10

Speaker: Nizar Touzi

Abstract

The market illiquidity model of Cetin, Jarrow, and Protter leads to a new class of hedging problems, and motivates the introduction of second order target problems. We provide a dual formulation which involves a convenient set of singular measures. Existence holds after control relaxation. This provides a theory for weak solutions of second order backward stochastic differential equations.

Presentation slides (pdf, 655 KB)

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