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A Forward Scheme for Backward SDEs
Please always quote using this URN:urn:nbn:de:0296-matheon-2709
- We introduce a forward scheme to simulate backward SDEs. Compared to existing schemes, we avoid high order nestings of conditional expectations backwards in time. In this way the error, when approximating the conditional expectation, in dependence of the time partition is significantly reduced. Besides this generic result, we present an implementable algorithm and provide an error analysis for it. Finally, we demonstrate the strength of the new algorithm by solving some financial problems numerically.
Author: | Christian Bender, Robert Denk |
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URN: | urn:nbn:de:0296-matheon-2709 |
Referee: | Peter Imkeller |
Document Type: | Preprint, Research Center Matheon |
Language: | English |
Date of first Publication: | 2005/02/12 |
Release Date: | 2005/10/18 |
Tag: | |
Institute: | Weierstraß-Institut für Angewandte Analysis und Stochastik (WIAS) |
MSC-Classification: | 65-XX NUMERICAL ANALYSIS / 65Cxx Probabilistic methods, simulation and stochastic differential equations (For theoretical aspects, see 68U20 and 60H35) / 65C05 Monte Carlo methods |
65-XX NUMERICAL ANALYSIS / 65Cxx Probabilistic methods, simulation and stochastic differential equations (For theoretical aspects, see 68U20 and 60H35) / 65C30 Stochastic differential and integral equations | |
Preprint Number: | 294 |