Uniqueness for nonlinear parabolic systems in stochastic game theory with application to financial economics. (Q637016)

The authors prove a uniqueness theorem for bounded weak solutions to nonlinear parabolic differential system of the form \[ \partial _t u - \Delta u + H(x, t, u, \nabla u) = G(x; t), \] with the Hamiltonian \(H\) satisfying a quadratic growth condition in \(\nabla u\) and \(G \in L^2\left (0,T;H^{-1}(\Omega ;\mathbb {R}^N) \right )\). These systems naturally arise in stochastic differential games theory for \(N \geq 1\) players. The theorem extends known results for bounded weak solutions to nonlinear elliptic and parabolic systems for \(N = 1\). An energy estimate is derived and applied to prove the uniqueness. At the end of the paper, a short introduction to stochastic games theory and portfolio theory is given as well as the example of a globally optimal hedging strategy on an incomplete market.