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Discrete-time approximation and Monte-Carlo simulation of backward stochastic differential equations. (English) Zbl 1071.60059
The paper introduces: 1. a discrete-time approximation for decoupled forward-backward stochastic differential equations; 2. a backward simulation scheme given a simulation-based estimator of the conditional expectation operator. In case 1, the \(L^p\)-norm of the error has the same order of the time step. Case 2 is specialized to the Malliavin calculus based regression approximation. Extensions to the reflected case are also considered.

60H30 Applications of stochastic analysis (to PDEs, etc.)
60H07 Stochastic calculus of variations and the Malliavin calculus
60H10 Stochastic ordinary differential equations (aspects of stochastic analysis)
Full Text: DOI
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