Forward-backward stochastic differential equation: A useful tool for mathematical finance and other related fields (Q698263): Difference between revisions

The paper is mainly a survey of forward-backward stochastic differential equations (FBSDE) that are a class of two-point boundary value problems for Itô-type stochastic differential equations. The paper consists of seven sections. After a brief introduction the author explains what BSDE's and FBSDE's are, how to pass from ODE to FBSDE, gives some examples in mathematical finance and describes stochastic optimal control problem. Then he presents basic theory of BSDE's and FBSDE's, states the optimal control problem concerned to FBSDE and gives conditions of its approximate solvability. Some applications to Black-Scholes formula, contingent claims for large investor and Black's consol rate conjecture are described.