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arXiv · 2408.02853

SIG-BSDE for Dynamic Risk Measures

Nacira Agram·Jan Rems·Emanuela Rosazza Gianin
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Abstract

In this paper, we consider dynamic risk measures induced by backward stochastic differential equations (BSDEs). We discuss different examples that come up in the literature, including the entropic risk measure and the risk measure arising from the ambiguous interest rate problem. We develop a numerical algorithm for solving a BSDE using the backward Euler-Maruyama scheme and the universal approximation theorem for the signature of a path. We prove the convergence theorem and use the algorithm to solve some examples of dynamic risk measures induced by BSDEs. At last a deep learning approach is included for solving the ambiguous interest rate problem as well.

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Nacira Agram, Jan Rems, Emanuela Rosazza Gianin. 2024-08-05. SIG-BSDE for Dynamic Risk Measures. https://arxiv.org/abs/2408.02853

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