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An Explicit Second-Order Numerical Scheme to Solve Decoupled Forward Backward Stochastic Equations

Published online by Cambridge University Press:  16 July 2018

Yu Fu and
Weidong Zhao
Yu Fu*
Affiliation:
School of Mathematics & Finance Institute, Shandong University, Jinan 250100, China.
Weidong Zhao*
Affiliation:
School of Mathematics & Finance Institute, Shandong University, Jinan 250100, China.
*
Corresponding author.Email address: nielf0614@126.com
* Corresponding author.Email address:wdzhao@sdu.edu.cn
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Abstract

An explicit numerical scheme is proposed for solving decoupled forward backward stochastic differential equations (FBSDE) represented in integral equation form. A general error inequality is derived for this numerical scheme, which also implies its stability. Error estimates are given based on this inequality, showing that the explicit scheme can be second-order. Some numerical experiments are carried out to illustrate the high accuracy of the proposed scheme.

Keywords

60H3565C2060H10Explicit schemesecond-orderdecoupled FBSDEerror estimate

Information

Type
Research Article
Information
East Asian Journal on Applied Mathematics , Volume 4 , Issue 4 , November 2014, pp. 368 - 385
Copyright
Copyright © Global-Science Press 2014

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