Volume 21, Issue 3
High Order Numerical Schemes for Second-Order FBSDEs with Applications to Stochastic Optimal Control

Weidong Zhao, Tao Zhou & Tao Kong

Commun. Comput. Phys., 21 (2017), pp. 808-834.

Published online: 2018-04

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  • Abstract

This is one of our series papers on multistep schemes for solving forward backward stochastic differential equations (FBSDEs) and related problems. Here we extend (with non-trivial updates) our multistep schemes in [W. Zhao, Y. Fu and T. Zhou, SIAM J. Sci. Comput., 36 (2014), pp. A1731-A1751] to solve the second-order FBSDEs (2FBSDEs). The key feature of the multistep schemes is that the Euler method is used to discretize the forward SDE, which dramatically reduces the entire computational complexity. Moreover, it is shown that the usual quantities of interest (e.g., the solution tuple (Yt ,Zt ,At ,Γt) of the 2FBSDEs) are still of high order accuracy. Several numerical examples are given to show the effectiveness of the proposed numerical schemes. Applications of our numerical schemes to stochastic optimal control problems are also presented.

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