Reducing variance in the numerical solution of BSDEs

Samu Alanko, Marco Avellaneda

Research output: Contribution to journalArticle

Abstract

Numerical methods based on time discretization and estimation of conditional expectations for solving backward stochastic differential equations (BSDEs) have been the object of considerable research, particularly in view of the applications to finance. We introduce and implement a simple control variate technique to reduce the simulation error of the conditional expectation estimates in BSDE methods. These modifications increase the accuracy of the existing algorithms without additional computational cost.

Original languageEnglish (US)
Pages (from-to)135-138
Number of pages4
JournalComptes Rendus Mathematique
Volume351
Issue number3-4
DOIs
StatePublished - Feb 2013

ASJC Scopus subject areas

  • Mathematics(all)

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