BSDEs with random default time and their applications to default risk

Details BSDEs with random default time and their applications to default risk BSDEs with random default time and their applications to default risk

2009-10-12

arxiv.org/abs/0910.2091v1

Economy

Quantitative Finance

Computational Finance

25 pages

Scientific paper

In this paper we are concerned with backward stochastic differential equations with random default time and their applications to default risk. The equations are driven by Brownian motion as well as a mutually independent martingale appearing in a defaultable setting. We show that these equations have unique solutions and a comparison theorem for their solutions. As an application, we get a saddle-point strategy for the related zero-sum stochastic differential game problem.

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