A multi-step scheme based on cubic spline for solving backward stochastic differential equations

DOI10.1016/J.APNUM.2019.09.016zbMATH Open1433.60041arXiv1809.00324OpenAlexW2978515965WikidataQ127179796 ScholiaQ127179796MaRDI QIDQ2301282FDOQ2301282

Authors: Long Teng, Aleksandr Lapitckii, Michael Günther 

Publication date: 24 February 2020

Published in: Applied Numerical Mathematics (Search for Journal in Brave)

Abstract: In this work we study a multi-step scheme on time-space grids proposed by W. Zhao et al. [28] for solving backward stochastic differential equations, where Lagrange interpolating polynomials are used to approximate the time-integrands with given values of these integrands at chosen multiple time levels. For a better stability and the admission of more time levels we investigate the application of spline instead of Lagrange interpolating polynomials to approximate the time-integrands. The resulting scheme is a semi-discretization in the time direction involving conditional expectations, which can be numerically solved by using the Gaussian quadrature rules and polynomial interpolations on the spatial grids. Several numerical examples including applications in finance are presented to demonstrate the high accuracy and stability of our new multi-step scheme.

Full work available at URL: https://arxiv.org/abs/1809.00324

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zbMATH Keywords

backward stochastic differential equationscubic splinesmulti-step schemeGauss-Hermite quadrature ruletime-space grid

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Applications of stochastic analysis (to PDEs, etc.) (60H30) Numerical solutions to stochastic differential and integral equations (65C30)

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