On Markovian solutions to Markov chain BSDEs

DOI10.3934/NACO.2012.2.257zbMATH Open1254.60056arXiv1111.5739OpenAlexW2144659059MaRDI QIDQ450741FDOQ450741

Authors: Samuel N. Cohen, Lukasz Szpruch 

Publication date: 14 September 2012

Published in: Numerical Algebra, Control and Optimization (Search for Journal in Brave)

Abstract: We study (backward) stochastic differential equations with noise coming from a finite state Markov chain. We show that, for the solutions of these equations to be `Markovian', in the sense that they are deterministic functions of the state of the underlying chain, the integrand must be of a specific form. This allows us to connect these equations to coupled systems of ODEs, and hence to give fast numerical methods for the evaluation of Markov-Chain BSDEs.

Full work available at URL: https://arxiv.org/abs/1111.5739

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zbMATH Keywords

numerical solutionMarkov chainsBSDEcoupled ODE

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Initial value problems, existence, uniqueness, continuous dependence and continuation of solutions to ordinary differential equations (34A12) Stochastic integrals (60H05) Continuous-time Markov processes on discrete state spaces (60J27)

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