A regression-based Monte Carlo method to solve backward stochastic differential equations

Preprint

25 August 2005

preprint
Published by arXiv in arXiv

https://doi.org/10.48550/arXiv.math/0508491

Abstract

We are concerned with the numerical resolution of backward stochastic differential equations. We propose a new numerical scheme based on iterative regressions on function bases, which coefficients are evaluated using Monte Carlo simulations. A full convergence analysis is derived. Numerical experiments about finance are included, in particular, concerning option pricing with differential interest rates.

Keywords

STOCHASTIC DIFFERENTIAL
CONVERGENCE ANALYSIS
BACKWARD STOCHASTIC
MONTE CARLO METHOD
OPTION PRICING
BASED MONTE
FINANCE

All Related Versions

Version 1, 2005-08-25, ArXiv
Published version: The Annals of Applied Probability, 15 (3), 2172.

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