1. Explicit solution to delayed forward and backward stochastic differential equations.
- Author
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Ma, Tianfu, Xu, Juanjuan, and Zhang, Huanshui
- Subjects
TIME delay systems ,STOCHASTIC differential equations ,LEAD time (Supply chain management) - Abstract
This paper is concerned with the linear delayed forward–backward stochastic differential equations (D-FBSDEs). The existence of time delay leads to the infinite-dimensional problem which makes the explicit solvability more challenging. The main contribution is to propose a discretisation approach which gives the explicit solution of the D-FBSDEs and consists of the following three steps: first, we transform the continuous-time D-FBSDEs into the discrete-time form with the aid of interval partition. Second, 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 which is also strictly proved under continuous-time framework. The proposed approach is applicable for more general FBSDEs with delay, which would provide a complete solution to the stochastic LQ control with time delay. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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