An efficient third-order scheme for BSDEs based on nonequidistant difference scheme

Abstract

In this paper we propose an efficient third-order numerical scheme for backward stochastic differential equations(BSDEs). We use 3-point Gauss-Hermite quadrature rule for approximation of the conditional expectation and avoid spatial interpolation by setting up a fully nested spatial grid and using the approximation of derivatives based on non-equidistant sample points. As a result, the overall computational complexity is reduced significantly. Several examples show that the proposed scheme is of third-order and very efficient.

arXiv comment14 pages, 6 tables

Cited by in corpus (1)

• Numerical methods for backward stochastic differential equations: A survey