Deferred Correction Methods for Forward Backward Stochastic Differential Equations

Tao TANG, Weidong Zhao, Tao Zhou*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

19 Citations (Scopus)

Abstract

The deferred correction (DC) method is a classical method for solving ordinary differential equations; one of its key features is to iteratively use lower order numerical methods so that high-order numerical scheme can be obtained. The main advantage of the DC approach is its simplicity and robustness. In this paper, the DC idea will be adopted to solve forward backward stochastic differential equations (FBSDEs) which have practical importance in many applications. Noted that it is difficult to design high-order and relatively clean numerical schemes for FBSDEs due to the involvement of randomness and the coupling of the FSDEs and BSDEs. This paper will describe how to use the simplest Euler method in each DC step-leading to simple computational complexity-to achieve high order rate of convergence.

Original languageEnglish
Pages (from-to)222-242
Number of pages21
JournalNumerical Mathematics
Volume10
Issue number2
DOIs
Publication statusPublished - 1 May 2017

Scopus Subject Areas

  • Modelling and Simulation
  • Control and Optimization
  • Computational Mathematics
  • Applied Mathematics

User-Defined Keywords

  • Deferred correction method
  • Euler method
  • forward backward stochastic differential equations
  • high-order scheme

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