📝 SummarXiv

Abstract

We introduce and develop the concepts of Geometric Backward Stochastic Differential Equations (GBSDEs, for short) and two-driver BSDEs. We demonstrate their natural suitability for modeling continuous-time dynamic return risk measures. We characterize a broad spectrum of associated, auxiliary ordinary BSDEs with drivers exhibiting growth rates involving terms of the form $y|\ln(y)|+|z|^2/y$. We establish the existence, regularity, uniqueness, and stability of solutions to this rich class of ordinary BSDEs, considering both bounded and unbounded coefficients and terminal conditions. We exploit these results to obtain corresponding results for the original two-driver BSDEs. Finally, we apply our findings within a GBSDE framework for representing the dynamics of return and star-shaped risk measures including (robust) $L^{p}$-norms, and analyze functional properties.