Discrete-time approximation and Monte-Carlo simulation of backward stochastic differential equations
AbstractWe suggest a discrete-time approximation for decoupled forward-backward stochastic differential equations. The Lp norm of the error is shown to be of the order of the time step. Given a simulation-based estimator of the conditional expectation operator, we then suggest a backward simulation scheme, and we study the induced Lp error. This estimate is more investigated in the context of the Malliavin approach for the approximation of conditional expectations. Extensions to the reflected case are also considered.
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Bibliographic InfoArticle provided by Elsevier in its journal Stochastic Processes and their Applications.
Volume (Year): 111 (2004)
Issue (Month): 2 (June)
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Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/505572/description#description
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