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

DOI10.1016/J.APNUM.2019.09.016MaRDI QIDQ2301282zbMATH OpenOpenAlexWikidataFDO

Authors Long Teng, Aleksandr Lapitckii, Michael Günther

Publication date 24 February 2020

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

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

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)

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.

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Cited in

(15)

• Gradient boosting-based numerical methods for high-dimensional backward stochastic differential equations
• An overview on deep learning-based approximation methods for partial differential equations
• High-order combined multi-step scheme for solving forward backward stochastic differential equations
• Solving BSDEs based on novel multi-step schemes and multilevel Monte Carlo
• An efficient numerical method for forward-backward stochastic differential equations driven by \(G\)-Brownian motion
• Multistep schemes for solving backward stochastic differential equations on GPU
• Numerical methods for backward stochastic differential equations: a survey
• A sparse-grid method for multi-dimensional backward stochastic differential equations
• Solving Backward Stochastic Differential Equations Using the Cubature Method: Application to Nonlinear Pricing
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• A multistep scheme to solve backward stochastic differential equations for option pricing on GPUs
• Derivation of multi-asset Black-Scholes differential equations
• A unified probabilistic discretization scheme for FBSDEs: stability, consistency, and convergence analysis
• High order one-step methods for backward stochastic differential equations via Itô-Taylor expansion
• Overcoming the curse of dimensionality in the numerical approximation of backward stochastic differential equations

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