On Markovian solutions to Markov Chain BSDEs

Samuel N. Cohen; Lukasz Szpruch

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arXiv · 1111.5739

On Markovian solutions to Markov Chain BSDEs

Samuel N. Cohen·Lukasz Szpruch

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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.

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BibTeX RIS

Samuel N. Cohen, Lukasz Szpruch. 2011-11-24. On Markovian solutions to Markov Chain BSDEs. https://arxiv.org/abs/1111.5739

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