Efficient numerical Fourier methods for coupled forward-backward SDEs (Q898981)

Three numerical schemes, respectively named explicit, local and global, are derived for solving coupled forward-backward stochastic differential equations. Results of numerical experiments are presented for four examples and indicate that the explicit method is preferable while the global method is the least effective. First -rder convergence is obtained; and it is shown that Richardson extrapolation can be used to get second-order convergence. The last example deals with finance and involves the hedging of an option with a correlated asset.