On Markovian solutions to Markov Chain BSDEs

Samuel N. Cohen, Lukasz Szpruch

Research output: Contribution to journalArticlepeer-review

Abstract

We study (backward) stochastic differential equations with noise coming from a finite state Markov chain. We show that, for the solutions of these equations to be `Markovian', in the sense that they are deterministic functions of the state of the underlying chain, the integrand must be of a specific form. This allows us to connect these equations to coupled systems of ODEs, and hence to give fast numerical methods for the evaluation of Markov-Chain BSDEs.
Original languageEnglish
Pages (from-to)257-269
JournalNumerical Algebra, Control and Optimization
Volume2
Issue number2
DOIs
Publication statusPublished - Jun 2012

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