BSDEs with random default time and their applications to default risk
Computational Finance
2009-10-13 v1 Probability
Pricing of Securities
Abstract
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.
Cite
@article{arxiv.0910.2091,
title = {BSDEs with random default time and their applications to default risk},
author = {Shige Peng and Xiaoming Xu},
journal= {arXiv preprint arXiv:0910.2091},
year = {2009}
}
Comments
25 pages