A probabilistic numerical method for fully nonlinear parabolic PDEs
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Publication:640058
DOI10.1214/10-AAP723zbMATH Open1230.65009arXiv0905.1863OpenAlexW1998562371MaRDI QIDQ640058FDOQ640058
Authors: Arash Fahim, Nizar Touzi, Xavier Warin 
Publication date: 12 October 2011
Published in: The Annals of Applied Probability (Search for Journal in Brave)
Abstract: We consider the probabilistic numerical scheme for fully nonlinear PDEs suggested in cite{cstv}, and show that it can be introduced naturally as a combination of Monte Carlo and finite differences scheme without appealing to the theory of backward stochastic differential equations. Our first main result provides the convergence of the discrete-time approximation and derives a bound on the discretization error in terms of the time step. An explicit implementable scheme requires to approximate the conditional expectation operators involved in the discretization. This induces a further Monte Carlo error. Our second main result is to prove the convergence of the latter approximation scheme, and to derive an upper bound on the approximation error. Numerical experiments are performed for the approximation of the solution of the mean curvature flow equation in dimensions two and three, and for two and five-dimensional (plus time) fully-nonlinear Hamilton-Jacobi-Bellman equations arising in the theory of portfolio optimization in financial mathematics.
Full work available at URL: https://arxiv.org/abs/0905.1863
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convergencenumerical resultsportfolio optimizationviscosity solutionsmonotone schemesMonte Carlo approximationsecond order backward stochastic differential equationsHamilton-Jacobi-Bellman PDEsmean curvature flow equation
Monte Carlo methods (65C05) Stochastic partial differential equations (aspects of stochastic analysis) (60H15) Numerical methods (including Monte Carlo methods) (91G60) Portfolio theory (91G10) Hamilton-Jacobi equations (35F21) PDEs with randomness, stochastic partial differential equations (35R60) Viscosity solutions to Hamilton-Jacobi equations in optimal control and differential games (49L25) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Numerical solutions to stochastic differential and integral equations (65C30)
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