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doi:10.22028/D291-30263
Title: | A PRIMAL–DUAL ALGORITHM FOR BSDES |
Author(s): | Bender, Christian Schweizer, Nikolaus Zhuo, Jia |
Language: | English |
Title: | Mathematical finance : an international journal of mathematics, statistics and financial economics |
Volume: | 27 |
Issue: | 3 |
Startpage: | 866 |
Endpage: | 901 |
Publisher/Platform: | Wiley |
Year of Publication: | 2017 |
Publikation type: | Journal Article |
Abstract: | We generalize the primal–dual methodology, which is popular in the pricing of early‐exercise options, to a backward dynamic programming equation associated with time discretization schemes of (reflected) backward stochastic differential equations (BSDEs). Taking as an input some approximate solution of the backward dynamic program, which was precomputed, e.g., by least‐squares Monte Carlo, this methodology enables us to construct a confidence interval for the unknown true solution of the time‐discretized (reflected) BSDE at time 0. We numerically demonstrate the practical applicability of our method in two 5‐dimensional nonlinear pricing problems where tight price bounds were previously unavailable. |
DOI of the first publication: | 10.1111/mafi.12100 |
URL of the first publication: | https://onlinelibrary.wiley.com/doi/full/10.1111/mafi.12100 |
Link to this record: | hdl:20.500.11880/28700 http://dx.doi.org/10.22028/D291-30263 |
ISSN: | 1467-9965 0960-1627 |
Date of registration: | 17-Feb-2020 |
Third-party funds sponsorship: | Deutsche Forschungsgemeinschaft |
Sponsorship ID: | BE3933/5‐1 |
Faculty: | MI - Fakultät für Mathematik und Informatik |
Department: | MI - Mathematik |
Professorship: | MI - Prof. Dr. Christian Bender |
Collections: | SciDok - Der Wissenschaftsserver der Universität des Saarlandes |
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