Numerical Analysis on Backward Stochastic Differential Equations by Finite Transposition Method

Abstract

In this paper, we propose a finite transposition method to solve backward stochastic differential equations (BSDEs, for short). Based on the transposition solution theory for BSDEs, our method offers a promising way of efficiently computing solutions, which can be regarded as an analogous method for BSDEs as the classical finite element method for partial differential equations. Our method has the advantage of easily computable conditional expectations.