The Mathematical Institute, University of Oxford, Eprints Archive

Using tree based regression to solve BSDE

Siriviriyakul, Prach (2014) Using tree based regression to solve BSDE. Masters thesis, Oxford University.

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Abstract

Backward stochastic differential equation (BSDE) is a very important tool that appears in various areas of financial mathematics. However, there has not been any well-established schemes for solving BSDEs numerically, particularly when they are of high dimension. In this dissertation, we present a new approach, based on tree-based regression for solving BSDEs. Our numerical experiments show that this method works well even when the number of dimension is as large as 25. Further more, when applying this method to solve reflected BSDEs, we found that the instability of the scheme is very high. We present herein a way to overcome this issue. Our results suggest that tree-based method is very promising for solving BSDEs.

Item Type:Thesis (Masters)
Subjects:H - N > Mathematics education
Research Groups:Mathematical and Computational Finance Group
ID Code:1849
Deposited By: Laura Auger
Deposited On:07 Aug 2014 06:47
Last Modified:29 May 2015 19:32

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