A forward scheme for backward SDEs

• Published in: Stochastic processes and their applications Vol. 117; no. 12; pp. 1793 - 1812
• Main Authors: Bender, Christian, Denk, Robert
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.12.2007; Elsevier Science; Elsevier
• Series: Stochastic Processes and their Applications
• Subjects: Applications; BSDE; BSDE Numerics Monte Carlo simulation Finance; Distribution theory; Exact sciences and technology; Finance; Insurance, economics, finance; Mathematics; Monte Carlo simulation; Numerics; Probability and statistics; Probability theory and stochastic processes; Sciences and techniques of general use; Statistics; Stochastic analysis; Stochastic processes; 65C30; Finance; 91B28; 65C05; BSDE; Monte Carlo simulation; Numerics; Monte Carlo method; Partition; Error estimation; Stochastic process; Algorithm; Convergence; 65C05; 65C30; 91B28; Conditional expectation; Simulation; Problem solving; BSDE; Numerics; Monte Carlo simulation; Finance; Application

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. B...