A primal-dual algorithm for BSDEs
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Publication:5283406
DOI10.1111/MAFI.12100zbMATH Open1423.91008arXiv1310.3694OpenAlexW2950427768MaRDI QIDQ5283406FDOQ5283406
Authors: Christian Bender, Nikolaus Schweizer, Jia Zhuo 
Publication date: 21 July 2017
Published in: Mathematical Finance (Search for Journal in Brave)
Abstract: We generalize the primal-dual methodology, which is popular in the pricing of early-exercise options, to a backward dynamic programming equation associated with time discretization schemes of (reflected) backward stochastic differential equations (BSDEs). Taking as an input some approximate solution of the backward dynamic program, which was pre-computed, e.g., by least-squares Monte Carlo, our methodology allows to construct a confidence interval for the unknown true solution of the time discretized (reflected) BSDE at time 0. We numerically demonstrate the practical applicability of our method in two five-dimensional nonlinear pricing problems where tight price bounds were previously unavailable.
Full work available at URL: https://arxiv.org/abs/1310.3694
Recommendations
Monte Carlo methods (65C05) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10)
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Cited In (20)
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