| CIRJE-F-976 | "An Asymptotic Expansion of Forward-Backward SDEs with a Perturbed Driver" |
| Author Name | Takahashi, Akihiko, and Toshihiro Yamada |
| Date | May 2015 |
| Full Paper | PDF file |
| Remarks | Revised version of CIRJE-F-902 (2013); Subsequently published in International Journal of Financial Engineering, Vol. 2, No. 2 (2015) 1550020 (29 pages) |
| Abstract |
Inspired by non-linear pricing in finance, this paper presents a mathematical validity of an asymptotic expansion scheme for a system of forward-backward stochastic differential equations (FBSDEs) in terms of a perturbed driver in the BSDE and a small diffusion in the FSDE. In particular, we represent the coefficients of the expansion of the FBSDE up to an arbitrary order, and obtain the error estimate of the expansion with respect to the driver and the small noise perturbation. |