Practical Issues Regarding Forward-Backward Stochastic Differential Equations

Dr. Tim Zajic

School of Mathematics
University of Minnesota

March 11, 1998

Abstract

Forward-backward stochastic differential equations provide a complete solution to he problems of pricing and hedging in the case of a large investor. Moreover, existing numerical techniques make the computation of the price and hedging portfolio in this setting numerically feasible. In this talk we describe some recent work on the large deviations behavior of the forward-backward stochastic differential equations and the implications of these results for the speed up of simulation times.