Analytical Approximation For Non-linear FBSDEs With Perturbation Scheme

In this paper, the authors have presented a simple analytical approximation scheme for the generic non-linear FBSDEs. By treating the interested system as the linear decoupled FBSDE perturbed with non-linear generator and feedback terms, they have shown that it is possible to carry out recursive approximation to an arbitrarily higher order, where the required calculations in each order are equivalent to those for the standard European contingent claims. They have also applied the perturbative method to the PDE framework following the so-called Four Step Scheme.

Provided by: Cornell University Topic: Big Data Date Added: Jun 2011 Format: PDF

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