BSDEs with random default time and related zero-sum stochastic differential games (Q2269672): Difference between revisions

The authors derive an existence and uniqueness result and a comparison theorem for Lipschitz Backward Stochastic Differential Equations (BSDEs) driven by a \(d\)-dimensional Brownian motion and by a d-dimensional martingale defined with respect to some random times \(\tau_i, \; i=1,\dots,d\). As specified by the authors, this type of equations appears naturally in the context of credit risk and especially in default risk where the random times \(\tau_i\) model the default times of some counterparts in a financial contract. The main structure of the paper is the following. First, in Theorem 3.1 the existence and the uniqueness of these BSDEs are obtained under the assumption that the driver is Lipschitz. Then, under an additional condition on the driver (condition (c)), a (strict) comparison theorem is established in Theorem 3.3 which constitutes the second main result of this paper. Finally, as an application, the authors relate in Section 4, the solution of a zero-sum stochastic differential game to a Lipschitz BSDE of the form of those studied in the previous sections.