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A Numerical Method and its Error Estimates for the Decoupled Forward-Backward Stochastic Differential Equations

Published online by Cambridge University Press:  03 June 2015

Weidong Zhao ,
Wei Zhang  and
Lili Ju
Weidong Zhao*
Affiliation:
School of Mathematics, Shandong University, Jinan, Shandong 250100, P.R. China
Wei Zhang*
Affiliation:
School of Mathematics, Shandong University, Jinan, Shandong 250100, P.R. China
Lili Ju*
Affiliation:
Department of Mathematics, University of South Carolina, Columbia, SC 29208, USA Beijing Computational Science Research Center, Beijing 100084, P.R. China
*
Email:[email protected]
Email:[email protected]
Corresponding author.Email:[email protected]
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Abstract

In this paper, a new numerical method for solving the decoupled forward-backward stochastic differential equations (FBSDEs) is proposed based on some specially derived reference equations. We rigorously analyze errors of the proposed method under general situations. Then we present error estimates for each of the specific cases when some classical numerical schemes for solving the forward SDE are taken in the method; in particular, we prove that the proposed method is second-order accurate if used together with the order-2.0 weak Taylor scheme for the SDE. Some examples are also given to numerically demonstrate the accuracy of the proposed method and verify the theoretical results.

Keywords

60H3560H1065C2065C30Decoupled forward-backward stochastic differential equationsnumerical schemeerror estimates
Type
Research Article
Information
Communications in Computational Physics , Volume 15 , Issue 3 , March 2014 , pp. 618 - 646
Copyright
Copyright © Global Science Press Limited 2014

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