An orthogonal basis expansion method for solving path-independent stochastic differential equations

Rahman Farnoosh; Amirhossein Sobhani; Hamidreza Rezazadeh

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arXiv · 1703.09658

An orthogonal basis expansion method for solving path-independent stochastic differential equations

Rahman Farnoosh·Amirhossein Sobhani·Hamidreza Rezazadeh

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Abstract

In this article, we present an orthogonal basis expansion method for solving stochastic differential equations with a path-independent solution of the form $X_{t}=ϕ(t,W_{t})$. For this purpose, we define a Hilbert space and construct an orthogonal basis for this inner product space with the aid of 2D-Hermite polynomials. With considering $X_{t}$ as orthogonal basis expansion, this method is implemented and the expansion coefficients are obtained by solving a system of nonlinear integro-differential equations. The strength of such a method is that expectation and variance of the solution is computed by these coefficients directly. Eventually, numerical results demonstrate its validity and efficiency in comparison with other numerical methods.

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BibTeX RIS

Rahman Farnoosh, Amirhossein Sobhani, Hamidreza Rezazadeh. 2017-11-10. An orthogonal basis expansion method for solving path-independent stochastic differential equations. https://arxiv.org/abs/1703.09658

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