Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10527314 | Stochastic Processes and their Applications | 2015 | 30 Pages |
Abstract
We study a BSDE with random terminal time that appears in the modeling of counterparty risk in finance. We model the terminal time as an invariant time, i.e. a time such that local martingales with respect to a reduced filtration and a possibly changed probability measure, once stopped right before that time, stay local martingales with respect to the original model filtration and probability measure. Using an Azéma supermartingale characterization of invariant times, we establish the equivalence between the original and a reduced BSDE.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematics (General)
Authors
Stéphane Crépey, Shiqi Song,