Article ID Journal Published Year Pages File Type
1157026 Stochastic Processes and their Applications 2007 20 Pages PDF
Abstract

We introduce a forward scheme for simulating backward SDEs. Compared to existing schemes, ours avoids high order nestings of conditional expectations backwards in time. In this way the error, when approximating the conditional expectation, depending on the time partition, is significantly reduced. Besides this generic result, we present an implementable algorithm and prove its convergence. Finally, we demonstrate the strength of the new algorithm by solving a financial problem numerically.

Related Topics
Physical Sciences and Engineering Mathematics Mathematics (General)
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