On the Monte Carlo simulation of BSDEs: An improvement on the Malliavin weights
We propose a generic framework for the analysis of Monte Carlo simulation schemes of backward SDEs. The general results are used to re-visit the convergence of the algorithm suggested by Bouchard and Touzi (2004) [6]. By keeping the higher order terms in the expansion of the Skorohod integrals resulting from the Malliavin integration by parts in [6], we introduce a variant of the latter algorithm which allows for a significant reduction of the numerical complexity. We prove the convergence of this improved Malliavin-based algorithm, and derive a bound on the induced error. In particular, we show that the price to pay for our simplification is to use a more accurate localizing function.
| Year of publication: |
2010
|
|---|---|
| Authors: | Crisan, D. ; Manolarakis, K. ; Touzi, N. |
| Published in: |
Stochastic Processes and their Applications. - Elsevier, ISSN 0304-4149. - Vol. 120.2010, 7, p. 1133-1158
|
| Publisher: |
Elsevier |
| Keywords: | BSDEs Weak approximations Monte Carlo methods Malliavin calculus |
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