Asymptotic Expansion for Forward-Backward SDEs with Jumps
Computational Finance
2018-09-10 v4 Mathematical Finance
Abstract
This work provides a semi-analytic approximation method for decoupled forwardbackward SDEs (FBSDEs) with jumps. In particular, we construct an asymptotic expansion method for FBSDEs driven by the random Poisson measures with {\sigma}-finite compensators as well as the standard Brownian motions around the small-variance limit of the forward SDE. We provide a semi-analytic solution technique as well as its error estimate for which we only need to solve essentially a system of linear ODEs. In the case of a finite jump measure with a bounded intensity, the method can also handle state-dependent and hence non-Poissonian jumps, which are quite relevant for many practical applications.
Cite
@article{arxiv.1510.03220,
title = {Asymptotic Expansion for Forward-Backward SDEs with Jumps},
author = {Masaaki Fujii and Akihiko Takahashi},
journal= {arXiv preprint arXiv:1510.03220},
year = {2018}
}
Comments
Forthcoming in Stochastics