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Forward–backward SDEs with distributional coefficients

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  • Issoglio, Elena
  • Jing, Shuai

Abstract

Forward–backward stochastic differential equations (FBSDEs) have attracted significant attention since they were introduced, 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 solution and show its existence and in certain cases its uniqueness. Moreover we establish a link with PDE theory via a non-linear Feynman–Kac formula. The associated semi-linear parabolic PDE is the same for both FBSDEs, also involves distributional coefficients and has not previously been investigated.

Suggested Citation

  • Issoglio, Elena & Jing, Shuai, 2020. "Forward–backward SDEs with distributional coefficients," Stochastic Processes and their Applications, Elsevier, vol. 130(1), pages 47-78.
    • Handle: RePEc:eee:spapps:v:130:y:2020:i:1:p:47-78
    DOI: 10.1016/j.spa.2019.01.001
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    References listed on IDEAS

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    1. Lejay, Antoine, 2004. "A probabilistic representation of the solution of some quasi-linear PDE with a divergence form operator. Application to existence of weak solutions of FBSDE," Stochastic Processes and their Applications, Elsevier, vol. 110(1), pages 145-176, March.
    2. N. El Karoui & S. Peng & M. C. Quenez, 1997. "Backward Stochastic Differential Equations in Finance," Mathematical Finance, Wiley Blackwell, vol. 7(1), pages 1-71, January.
    3. Delarue, F. & Guatteri, G., 2006. "Weak existence and uniqueness for forward-backward SDEs," Stochastic Processes and their Applications, Elsevier, vol. 116(12), pages 1712-1742, December.
    4. Gozzi, Fausto & Russo, Francesco, 2006. "Weak Dirichlet processes with a stochastic control perspective," Stochastic Processes and their Applications, Elsevier, vol. 116(11), pages 1563-1583, November.
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    Cited by:

    1. Luo, Peng & Menoukeu-Pamen, Olivier & Tangpi, Ludovic, 2022. "Strong solutions of forward–backward stochastic differential equations with measurable coefficients," Stochastic Processes and their Applications, Elsevier, vol. 144(C), pages 1-22.
    2. De Angelis, Tiziano & Germain, Maximilien & Issoglio, Elena, 2022. "A numerical scheme for stochastic differential equations with distributional drift," Stochastic Processes and their Applications, Elsevier, vol. 154(C), pages 55-90.
    3. Barrasso, Adrien & Russo, Francesco, 2021. "Martingale driven BSDEs, PDEs and other related deterministic problems," Stochastic Processes and their Applications, Elsevier, vol. 133(C), pages 193-228.
    4. Adrien Barrasso & Francesco Russo, 2021. "Backward Stochastic Differential Equations with No Driving Martingale, Markov Processes and Associated Pseudo-Partial Differential Equations: Part II—Decoupled Mild Solutions and Examples," Journal of Theoretical Probability, Springer, vol. 34(3), pages 1110-1148, September.

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