Abstract

A Backward Stochastic Differential Equation (BSDE) is a stochastic differential equation for which a terminal condition has been specified. In Ruijter and Oosterlee (A Fourier-cosine method for an efficient computation of solutions to BSDEs, 2013) a Fourier-cosine method to solve BSDEs is developed. This technique is known as BCOS method and consists of the approximation of the BSDE’s solution backwards in time by the use of the COS method developed in Fang and Oosterlee (SIAM J Sci Comput 31(2):826–848, 2008) to compute the conditional expectations that rise after the discretization by means of a θ-method for the time-integration.

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