Malliavin calculus for backward stochastic differential equations and application to numerical solutions

DOI10.1214/11-AAP762zbMATH Open1246.60081arXiv1202.4625OpenAlexW3099042891MaRDI QIDQ657705FDOQ657705

Authors: Yaozhong Hu, David Nualart, Xiaoming Song 

Publication date: 10 January 2012

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: In this paper we study backward stochastic differential equations with general terminal value and general random generator. In particular, we do not require the terminal value be given by a forward diffusion equation. The randomness of the generator does not need to be from a forward equation, either. Motivated from applications to numerical simulations, first we obtain the $L^p$-H"{o}lder continuity of the solution. Then we construct several numerical approximation schemes for backward stochastic differential equations and obtain the rate of convergence of the schemes based on the obtained $L^p$-H"{o}lder continuity results. The main tool is the Malliavin calculus.

Full work available at URL: https://arxiv.org/abs/1202.4625

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zbMATH Keywords

Malliavin calculusrate of convergencebackward stochastic differential equationexplicit schemeimplicit schemeClark-Ocone-Haussman formula[https://portal.mardi4nfdi.de/w/index.php?title=+Special%3ASearch&search=H%EF%BF%BD%EF%BF%BDlder+continuity+of+solutions&go=Go H��lder continuity of solutions]

Mathematics Subject Classification ID

Stochastic calculus of variations and the Malliavin calculus (60H07) Numerical methods (including Monte Carlo methods) (91G60) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) 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 (38)

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• Dynamic derivative-based investment strategy for mean-variance asset-liability management with stochastic volatility
• Approximation of backward stochastic differential equations using Malliavin weights and least-squares regression
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• Overcoming the curse of dimensionality in the numerical approximation of backward stochastic differential equations
• A backward doubly stochastic differential equation approach for nonlinear filtering problems
• Mean-square convergence of numerical approximations for a class of backward stochastic differential equations
• Linear Volterra backward stochastic integral equations
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