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Article Dans Une Revue Finance and Stochastics Année : 2019

An ergodic BSDE approach to entropic risk measure and its large time behavior

Wing Fung Chong
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Ying Hu
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Gechun Liang
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Résumé

This paper shows that the long-time behavior of the entropic risk measure (under both forward performance process framework and classical utility framework) converges to a constant, which is independent of the initial state of the stochastic factors in a stochastic factor model. The exponential convergence rate to the long-term limit is also obtained by using ergodic backward stochastic differential equation method. Finally, the paper establishes a connection between the two notions of entropic risk measures and their large time behavior.

Dates et versions

hal-01361585 , version 1 (07-09-2016)

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Wing Fung Chong, Ying Hu, Gechun Liang, Thaleia Zariphopoulou. An ergodic BSDE approach to entropic risk measure and its large time behavior. Finance and Stochastics, 2019, 23 (1), pp.239-273. ⟨10.1007/s00780-018-0377-3⟩. ⟨hal-01361585⟩
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