Forward-backward SDEs with distributional coefficients

DOI10.1016/J.SPA.2019.01.001zbMATH Open1443.60062arXiv1605.01558OpenAlexW2964029487WikidataQ128564656 ScholiaQ128564656MaRDI QIDQ2289778FDOQ2289778

Authors: E. Issoglio, Shuai Jing 

Publication date: 24 January 2020

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: Forward-backward stochastic differential equations (FBSDEs) have attracted significant attention since they were introduced almost 30 years ago, due to their wide range of applications, from solving non-linear PDEs to pricing American-type options. Here, we consider two new classes of multidimensional FBSDEs with distributional coefficients (elements of a Sobolev space with negative order). We introduce a suitable notion of a solution, show existence and uniqueness of a strong solution of the first FBSDE, and weak existence for the second. We establish a link with PDE theory via a nonlinear Feynman-Kac representation formula. The associated semi-linear second order parabolic PDE is the same for both FBSDEs, also involves distributional coefficients and has not previously been investigated; our analysis uses mild solutions, Sobolev spaces and semigroup theory.

Full work available at URL: https://arxiv.org/abs/1605.01558

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zbMATH Keywords

Sobolev spacesweak solutionsdistributional coefficientsmild solutionsforward-backward stochastic differential equationssingular PDEssingular FBSDEsnon-linear Feynman-Kac formulavirtual solutions

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Second-order parabolic equations (35K10) Nonlinear parabolic equations (35K55) Applications of stochastic analysis (to PDEs, etc.) (60H30)

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Cited In (22)

• A Feynman-Kac result via Markov BSDEs with generalised drivers
• Forward-backward SDEs with discontinuous coefficients
• A forward-backward SDE approach to affine models
• Forward-backward stochastic differential equations and their applications
• Forward-backward SDEs and the CIR model
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• A non-linear parabolic PDE with a distributional coefficient and its applications to stochastic analysis
• Forward-backward SDEs with random terminal time and applications to pricing special European-type options for a large investor
• Nonparametric estimation for FBSDEs models with applications in finance
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• Martingale driven BSDEs, PDEs and other related deterministic problems
• A numerical scheme for stochastic differential equations with distributional drift

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