A regression-based Monte Carlo method to solve backward stochastic differential equations
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Open Access
- 1 August 2005
- journal article
- Published by Institute of Mathematical Statistics in The Annals of Applied Probability
- Vol. 15 (3), 2172-2202
- https://doi.org/10.1214/105051605000000412
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
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