A New Kind of Accurate Numerical Method for Backward Stochastic Differential Equations

Abstract

In this paper, we propose a new kind of numerical simulation method for backward stochastic differential equations (BSDEs). We discretize the continuous BSDEs on time‐space discrete grids, use the Monte Carlo method to approximate mathematical expectations, and use space interpolations to compute values at non‐grid points. To demonstrate the accuracy and the effectiveness of our method, several numerical examples are given.