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arXiv · 2008.03488

A New Approach for Solving Delayed Forward and Backward Stochastic Differential Equations

Tianfu Ma·Juanjuan Xu·Huanshui Zhang
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Abstract

This paper is concerned with the decoupling of delayed linear forward-backward stochastic differential equations (D-FBSDEs), which is much more involved than the delay-free case due to the infinite dimension caused by the delay. A new approach of `discretization' is proposed to obtain the explicit solution to the D-FBSDEs. Firstly, we transform the continuous-time D-FBSDEs into the discrete-time form by using discretization. Secondly, we derive the solution of the discrete-time D-FBSDEs by applying backward iterative induction. Finally the explicit solution of the continuous-time D-FBSDEs is obtained by taking the limit to the solution of discrete-time form. The proposed approach can be applied to solve more general FBSDEs with delay, which would provide a complete solution to the stochastic LQ control with time delay.

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Tianfu Ma, Juanjuan Xu, Huanshui Zhang. 2020-08-08. A New Approach for Solving Delayed Forward and Backward Stochastic Differential Equations. https://arxiv.org/abs/2008.03488

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