Proves O(1/sqrt(penalty)) convergence rate between reflected quadratic-generator BSDEs and penalized BSDEs via BMO martingales, with application to Euler polygonal approximation for sub-quadratic generators.
Numerical simulation of BSDEs using empirical regression methods: theory and practice
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abstract
This article deals with the numerical resolution of backward stochastic differential equations. Firstly, we consider a rather general case where the filtration is generated by a Brownian motion and a Poisson random measure. We provide a simulation algorithm based on iterative regressions on function bases, which coefficients are evaluated using Monte Carlo simulations. We state fully explicit error bounds. Secondly, restricting to the case of a Brownian filtration, we consider reflected BSDEs and adapt the previous algorithm to that situation. The complexity of the algorithm is very competitive and allows us to treat numerical results in dimension 10.
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2026 1verdicts
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A note on convergence rate for reflected BSDEs with quadratic generators by penalization method
Proves O(1/sqrt(penalty)) convergence rate between reflected quadratic-generator BSDEs and penalized BSDEs via BMO martingales, with application to Euler polygonal approximation for sub-quadratic generators.