Discretization of backward stochastic Volterra integral equations

DOI10.1142/9789814436434_0005MaRDI QIDQ2849675zbMATH OpenOpenAlexFDO

Authors Christian Bender, Stanislav Pokalyuk

Publication date 24 September 2013

Published in Recent Developments in Computational Finance (Search for Journal in Brave)

Full work available at URL https://semanticscholar.org/paper/00c252dcb19710cad1e9a3fdc4f405f04acbad7d

zbMATH Keywords

adapted M-solutionbackward stochastic Volterra integral equationsconvergence theoremnumerical approximationsnumerical methodquasilinear partial differential equations of parabolic typespeed of convergence

Mathematics Subject Classification ID

Quasilinear parabolic equations (35K59) Volterra integral equations (45D05) Stochastic integral equations (60H20) Numerical solutions to stochastic differential and integral equations (65C30) Numerical methods for integral equations (65R20) Numerical methods (including Monte Carlo methods) (91G60) Financial applications of other theories (91G80)

Review text

The starting idea of this paper consists in a generalization of a numerical method for backward stochastic differential equations proposed by \textit{J. Ma} et al. [Ann. Appl. Probab. 12, No. 1, 302--316 (2002; Zbl 1017.60074)], to solve another class of stochastic differential equations -- namely, backward stochastic Volterra integral equations (BSVIEs), which play an important role in risk theory (see for example [\textit{J. Yong}, Appl. Anal. 86, No. 11, 1429--1442 (2007; Zbl 1134.91486)] for details).NEWLINENEWLINEAfter a good introduction of the adequate notations the well-posedness result is presented for the BSVIEs given by \textit{J. Yong} [Probab. Theory Relat. Fields 142, No. 1--2, 21--77 (2008; Zbl 1148.60039)]. The main result is given in Theorem 3.6 (a convergence theorem). The next two sections are devoted to the proof of this theorem, first in a ``smooth case (which is important because it gives a representation formula for the solution of BSVIEs in terms of systems of parabolic Cauchy problems) and then in a general case.NEWLINENEWLINEA good example to illustrate the numerical approximation is presented. Also, the speed of convergence of the proposed algorithm is obtained.NEWLINENEWLINEFor the entire collection see [Zbl 1272.91008].

Recommendations

• scientific article; zbMATH DE number 1069628
• SOLVABILITY OF GENERAL BACKWARD STOCHASTIC VOLTERRA INTEGRAL EQUATIONS
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• Approximations for adapted M-solutions of type-II backward stochastic Volterra integral equations

Cited in

(10)

• A unified approach to well-posedness of type-I backward stochastic Volterra integral equations
• Recursive utility processes, dynamic risk measures and quadratic backward stochastic Volterra integral equations
• Backward doubly stochastic Volterra integral equations and their applications
• A class of time inconsistent risk measures and backward stochastic Volterra integral equations
• Extended backward stochastic Volterra integral equations, quasilinear parabolic equations, and Feynman-Kac formula
• Time-inconsistent stochastic optimal control problems and backward stochastic Volterra integral equations
• Approximate representations of solutions to SVIEs, and an application to numerical analysis
• Numerical methods for backward stochastic differential equations: a survey
• Approximations for adapted M-solutions of type-II backward stochastic Volterra integral equations
• Malliavin calculus for backward stochastic differential equations and application to numerical solutions

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