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A regression-based Monte Carlo method to solve backward stochastic differential equations

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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.

fields

quant-ph 1

years

2026 1

verdicts

UNVERDICTED 1

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