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We study the limiting behavior of solutions to appropriately rescaled versions of the Allen-Cahn equation, a model for phase transition in polycrystalline material. We rigourously establish the existence in the limit of a phase-antiphase interface evolving according to mean curvature motion. This assertion is valid for all positive time, the motion interpreted in the generalized sense of Evans-Spruck and Chen-Giga-Goto after the onset of geometric singularities.

The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only assumed to be a continuous function of time. The hedging problem is to construct a minimal super-hedging portfolio that consists of dynamically trading the underlying risky asset and a static position of vanilla options which can be exercised at the given, fixed maturity. The dual is a Monge-Kantorovich type martingale transport problem of maximizing the expected value of the option over all martingale measures that have a given marginal at maturity. In addition to duality, a family of simple, piecewise constant super-replication portfolios that asymptotically achieve the minimal super-replication cost is constructed.

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We provide an existence and uniqueness theory for an extension of backward SDEs to the second order. While standard Backward SDEs are naturally connected to semilinear PDEs, our second order extension is connected to fully nonlinear PDEs, as suggested in [4]. In particular, we provide a fully nonlinear extension of the Feynman-Kac formula. Unlike [4], the alternative formulation of this paper insists that the equation must hold under a non-dominated family of mutually singular probability measures. The key argument is a stochastic representation, suggested by the optimal control interpretation, and analyzed in the accompanying paper [17].

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