BSDEs with random default time and their applications to default risk

Shige Peng and Xiaoming Xu

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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.

Date: 2009-10
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0910.2091

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