Deep learning algorithms for solving high-dimensional nonlinear backward stochastic differential equations

DOI10.3934/DCDSB.2023151arXiv2010.01319OpenAlexW3089807094MaRDI QIDQ6201366FDOQ6201366

Long Teng, Lorenc Kapllani

Publication date: 20 February 2024

Published in: Discrete and Continuous Dynamical Systems. Series B (Search for Journal in Brave)

Abstract: In this work, we propose a new deep learning-based scheme for solving high dimensional nonlinear backward stochastic differential equations (BSDEs). The idea is to reformulate the problem as a global optimization, where the local loss functions are included. Essentially, we approximate the unknown solution of a BSDE using a deep neural network and its gradient with automatic differentiation. The approximations are performed by globally minimizing the quadratic local loss function defined at each time step, which always includes the terminal condition. This kind of loss functions are obtained by iterating the Euler discretization of the time integrals with the terminal condition. Our formulation can prompt the stochastic gradient descent algorithm not only to take the accuracy at each time layer into account, but also converge to a good local minima. In order to demonstrate performances of our algorithm, several high-dimensional nonlinear BSDEs including pricing problems in finance are provided.

Full work available at URL: https://arxiv.org/abs/2010.01319

zbMATH Keywords

high-dimensional problemsbackward stochastic differential equationsrecurrent neural networkautomatic differentiationdeep neural networknonlinear option pricingadditive discretization

Mathematics Subject Classification ID

Artificial neural networks and deep learning (68T07) Probabilistic models, generic numerical methods in probability and statistics (65C20) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Numerical solutions to stochastic differential and integral equations (65C30)

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Cited In (1)

• Deep learning scheme for forward utilities using ergodic BSDEs

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