A Multistep Scheme for Decoupled Forward-Backward Stochastic Differential Equations - Volume 9 Issue 2 - Weidong Zhao, Wei Zhang, Lili Ju

In this paper, we mainly investigate the weak convergence analysis about the error terms which are determined by the discretization for solving the stochastic differential equation (SDE, for short) in forward-backward stochastic differential equations (FBSDEs, for short), which is on the basis of Itô Taylor expansion, the numerical SDE theory, and numerical FBSDEs theory. Under the weak convergence analysis of FBSDEs, we further establish better error estimates of recent numerical schemes for solving FBSDEs.

We propose new numerical schemes for decoupled forward-backward stochastic differential equations (FBSDEs) with jumps, where the stochastic dynamics are driven by a $d$-dimensional Brownian motion and an independent compensated Poisson random measure. A semi-discrete scheme is developed for discrete time approximation, which is constituted by a classic scheme for the forward SDE [17, 25] and a novel scheme for the backward SDE. Under some reasonable regularity conditions, we prove that the semi-discrete scheme can achieve second-order convergence in approximating the FBSDEs of interest; and such convergence rate does not require jump-adapted temporal discretization. Next, to add in spatial discretization, a fully discrete scheme is developed by designing accurate quadrature rules for estimating the involved conditional mathematical expectations. Several numerical examples are given to illustrate the effectiveness and the high accuracy of the proposed schemes.

In this paper, we shall introduce the interval-valued spatial error model. Based on the idea of least square method of single-valued case, we give the parameter estimator for interval-valued spatial error model. The theoretical properties of the proposed estimator are proved. Finally, we give the numerical analysis and a real example.