Second order discretization of backward SDEs and simulation with the cubature method
Second order discretization of backward SDEs and simulation with the cubature method
We propose a second order discretization for backward stochastic differential equations (BSDEs) with possibly nonsmooth boundary data. When implemented, the discretization method requires essentially the same computational effort with the Euler scheme for BSDEs of Bouchard and Touzi [Stochastic Process. Appl. 111 (2004) 175–206] and Zhang [Ann. Appl. Probab. 14 …