Abstract
We saw in Chap. 4 that the problem of pricing and hedging financial derivatives can be modeled in terms of (possibly reflected) backward stochastic differential equations (BSDEs) or, equivalently in the Markovian setup, by partial integro-differential equations or variational inequalities (PIDEs or PDEs for short). Also, Chaps. 10 and 11 just provided thorough illustrations of the abilities of simulation/regression numerical schemes for solving high-dimensional pricing equations: very large systems of partial differential equations in Chap. 10 and Markov chain related systems of ODEs in Chap. 11.
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