On g-expectations and filtration-consistent nonlinear expectations

Abstract

In this paper, we obtain a comparison theorem and an invariant representation theorem for backward stochastic differential equations (BSDEs) without any assumption on the second variable $z$. Using the two results, we further develop the theory of $g$-expectations. Filtration-consistent nonlinear expectation ($F$-expectation) provides an ideal characterization for the dynamical risk measures, asset pricing and utilities. We propose two new conditions: an absolutely continuous condition and a (locally Lipschitz) domination condition. Under the two conditions respectively, we prove that any $F$-expectation can be represented as a $g$-expectation. Our results contain a representation theorem for $n$-dimensional $F$-expectations in the Lipschitz case, and two representation theorems for 1-dimensional $F$-expectations in the locally Lipschitz case, which contain quadratic $F$-expectations.