Second order discretization of Backward SDEs

Details Second order discretization of Backward SDEs Second order discretization of Backward SDEs

2010-12-27

arxiv.org/abs/1012.5650v1

Mathematics

Probability

14 pages

Scientific paper

In [5] the authors suggested a new algorithm for the numerical approximation of a BSDE by merging the cubature method with the first order discretization developed by [3] and [16]. Though the algorithm presented in [5] compared satisfactorily with other methods it lacked the higher order nature of the cubature method due to the use of the low order discretization. In this paper we introduce a second order discretization of the BSDE in the spirit of higher order implicit-explicit schemes for forward SDEs and predictor corrector methods.

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