Weak solutions of backward stochastic differential equations with continuous generator

Nadira Bouchemella, Paul Raynaud De Fitte

Published 2011-04-06, updated 2013-08-19Version 4

We prove the existence of a weak solution to a backward stochastic differential equation (BSDE) $$ Y_t=\xi+\int_t^T f(s,X_s,Y_s,Z_s)\,ds-\int_t^T Z_s\,d\wien_s$$ in a finite-dimensional space, where $f(t,x,y,z)$ is affine with respect to $z$, and satisfies a sublinear growth condition and a continuity condition This solution takes the form of a triplet $(Y,Z,L)$ of processes defined on an extended probability space and satisfying $$ Y_t=\xi+\int_t^T f(s,X_s,Y_s,Z_s)\,ds-\int_t^T Z_s\,d\wien_s-(L_T-L_t)$$ where $L$ is a continuous martingale which is orthogonal to any $\wien$. The solution is constructed on an extended probability space, using Young measures on the space of trajectories. One component of this space is the Skorokhod space D endowed with the topology S of Jakubowski.