Forward-backward SDEs with distributional coefficients

Elena Issoglio; Shuai Jing

doi:10.1016/j.spa.2019.01.001

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arXiv · 1605.01558

Forward-backward SDEs with distributional coefficients

Elena Issoglio·Shuai Jing

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Abstract

Forward-backward stochastic differential equations (FBSDEs) have attracted significant attention since they were introduced almost 30 years ago, due to their wide range of applications, from solving non-linear PDEs to pricing American-type options. Here, we consider two new classes of multidimensional FBSDEs with distributional coefficients (elements of a Sobolev space with negative order). We introduce a suitable notion of a solution, show existence and uniqueness of a strong solution of the first FBSDE, and weak existence for the second. We establish a link with PDE theory via a nonlinear Feynman-Kac representation formula. The associated semi-linear second order parabolic PDE is the same for both FBSDEs, also involves distributional coefficients and has not previously been investigated; our analysis uses mild solutions, Sobolev spaces and semigroup theory.

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Elena Issoglio, Shuai Jing. 2016-05-05. Forward-backward SDEs with distributional coefficients. https://doi.org/10.1016/j.spa.2019.01.001

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