A second-order discretization for forward-backward SDEs using local approximations with Malliavin calculus

Naito Riu () and Yamada Toshihiro ()
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Naito Riu: Asset Management One Co., Ltd., Tokyo, Japan
Yamada Toshihiro: Hitotsubashi University, Tokyo, Japan

Monte Carlo Methods and Applications, 2019, vol. 25, issue 4, 341-361

Abstract: The paper proposes a new second-order discretization method for forward-backward stochastic differential equations. The method is given by an algorithm with polynomials of Brownian motions where the local approximations using Malliavin calculus play a role. For the implementation, we introduce a new least squares Monte Carlo method for the scheme. A numerical example is illustrated to check the effectiveness.

Keywords: Backward stochastic differential equation; second-order discretization; Malliavin calculus (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/mcma-2019-2053

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