Approximation of backward stochastic differential equations using Malliavin weights and least-squares regression
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Publication:5963510
Malliavin calculusbackward stochastic differential equationsdynamic programming equationnumerical schemeempirical regressionsnon-asymptotic error estimates
Stochastic calculus of variations and the Malliavin calculus (60H07) Dynamic programming (90C39) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Dynamic programming in optimal control and differential games (49L20) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Numerical solutions to stochastic differential and integral equations (65C30)
Abstract: We design a numerical scheme for solving a Dynamic Programming equation with Malliavin weights arising from the time-discretization of backward stochastic differential equations with the integration by parts-representation of the -component by (Ann. Appl. Probab. 12 (2002) 1390-1418). When the sequence of conditional expectations is computed using empirical least-squares regressions, we establish, under general conditions, tight error bounds as the time-average of local regression errors only (up to logarithmic factors). We compute the algorithm complexity by a suitable optimization of the parameters, depending on the dimension and the smoothness of value functions, in the limit as the number of grid times goes to infinity. The estimates take into account the regularity of the terminal function.
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Cited in
(29)- Machine learning approximation algorithms for high-dimensional fully nonlinear partial differential equations and second-order backward stochastic differential equations
- A multi-step algorithm for BSDEs based on a predictor-corrector scheme and least-squares Monte Carlo
- Approximation of the solution of the backward stochastic differential equation. Small noise, large sample and high frequency cases
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