An Ergodic BSDE Approach to Forward Entropic Risk Measures: Representation and Large-Maturity Behavior
34 Pages Posted: 2 Dec 2016 Last revised: 28 Jan 2021
Date Written: April 11, 2017
Using elements from the theory of ergodic backward stochastic differential equations (BSDE), we study the behavior of forward entropic risk measures. We provide their general representation results (via both BSDE and convex duality) and examine their behavior for risk positions of long maturities. We show that forward entropic risk measures converge to some constant exponentially fast. We also compare them with their classical counterparts and derive a parity result.
Suggested Citation: Suggested Citation
Chong, Wing Fung and Hu, Ying and Liang, Gechun and Zariphopoulou, Thaleia, An Ergodic BSDE Approach to Forward Entropic Risk Measures: Representation and Large-Maturity Behavior (April 11, 2017). Available at SSRN: https://ssrn.com/abstract=2878882 or http://dx.doi.org/10.2139/ssrn.2878882
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