Search Results (11)

This paper investigates Mean Field Game methods to solve missile interception strategies in three-dimensional space, with a focus on analyzing the pursuit–evasion problem in many-to-many scenarios. By extending traditional missile interception models, an efficient solution is proposed to avoid dimensional explosion and communication burdens, particularly for large-scale, multi-missile systems. The paper presents a system of stochastic differential equations with control constraints, describing the motion dynamics between the missile (pursuer) and the target (evader), and defines the associated cost function, considering proximity group distributions with other missiles and targets. Next, Hamilton–Jacobi–Bellman equations for the pursuers and evaders are derived, and the uniqueness of the distributional solution is proved. Furthermore, using the $ϵ$-Nash equilibrium framework, it is demonstrated that, under the MFG model, participants can deviate from the optimal strategy within a certain tolerance, while still minimizing the cost. Finally, the paper summarizes the derivation process of the optimal strategy and proves that, under reasonable assumptions, the system can achieve a uniquely stable equilibrium, ensuring the stability of the strategies and distributions of both the pursuers and evaders. The research provides a scalable solution to high-risk, multi-agent control problems, with significant practical applications, particularly in fields such as missile defense systems. Full article

This paper investigates three-dimensional pursuit problems in noncooperative stochastic differential games. By introducing a novel polynomial value function capable of addressing high-dimensional dynamic systems, the forward–backward stochastic differential equations (FBSDEs) for optimal strategies are derived. The uniqueness of the value function under bounded control inputs is rigorously established as a theoretical foundation. The proposed methodology constructs optimal closed-loop feedback strategies for both pursuers and evaders, ensuring state convergence and solution uniqueness. Furthermore, the Lebesgue measure of the barrier surface is computed, enabling the design of strategies for scenarios involving multiple pursuers and evaders. To validate its applicability, the method is applied to missile interception games. Simulations confirm that the optimal strategies enable pursuers to consistently intercept evaders under stochastic dynamics, demonstrating the robustness and practical relevance of the approach in pursuit–evasion problems. Full article

The theory of forward–backward stochastic differential equations occupies an important position in stochastic analysis and practical applications. However, the numerical solution of forward–backward stochastic differential equations, especially for high-dimensional cases, has stagnated. The development of deep learning provides ideas for its high-dimensional solution. In this paper, our focus lies on the fully coupled forward–backward stochastic differential equation. We design a neural network structure tailored to the characteristics of the equation and develop a hybrid BiGRU model for solving it. We introduce the time dimension based on the sequence nature after discretizing the FBSDE. By considering the interactions between preceding and succeeding time steps, we construct the BiGRU hybrid model. This enables us to effectively capture both long- and short-term dependencies, thus mitigating issues such as gradient vanishing and explosion. Residual learning is introduced within the neural network at each time step; the structure of the loss function is adjusted according to the properties of the equation. The model established above can effectively solve fully coupled forward–backward stochastic differential equations, effectively avoiding the effects of dimensional catastrophe, gradient vanishing, and gradient explosion problems, with higher accuracy, stronger stability, and stronger model interpretability. Full article

Forward-backward stochastic differential equations (FBSDEs) have received more and more attention in the past two decades. FBSDEs can be applied to many fields, such as economics and finance, engineering control, population dynamics analysis, and so on. In most cases, FBSDEs are nonlinear and high-dimensional and cannot be obtained as analytic solutions. Therefore, it is necessary and important to design their numerical approximation methods. In this paper, a novel numerical method of multi-dimensional coupled FBSDEs is proposed based on a fractional Fourier fast transform (FrFFT) algorithm, which is used to compute the Fourier and inverse Fourier transforms. For the forward component of FBSDEs, time discretization is used as well as the backward equation to yield a recursive system with terminal conditions. For the numerical experiments to be successful, three types of numerical methods were used to solve the problem, which ensured the efficiency and speed of computation. Finally, the numerical methods for different examples are verified. Full article

We present a pathwise deep Backward Stochastic Differential Equation (BSDE) method for Forward Backward Stochastic Differential Equations with terminal conditions that time-steps the BSDE backwards and apply it to the differential rates problem as a prototypical nonlinear problem of independent financial interest. The nonlinear equation for the backward time-step is solved exactly or by a Taylor-based approximation. This is the first application of such a pathwise backward time-stepping deep BSDE approach for problems with nonlinear generators. We extend the method to the case when the initial value of the forward components X can be a parameter rather than fixed and similarly to also learn values at intermediate times. We present numerical results for a call combination and for a straddle, the latter comparing well to those obtained by Forsyth and Labahn with a specialized PDE solver. Full article

BSDEs are applied in many areas, particularly in finance and economics. In this paper, we extended the convolution method to numerically solve FBSDEs. First, a generalized θ-scheme is applied to discretize the backwards component. Second, the convolution method is used to solve the conditional expectation. Third, the resulting convolution is dealt with numerically by the Fourier transform. Therefore, the fractional FFT algorithm is applied to compute the Fourier and inverse the transforms. Then, we prove some error estimates. Finally, a numerical example is implemented to test the efficiency and stability of the proposed method. Full article

The curse of dimensionality problem refers to a set of troubles arising when dealing with huge amount of data as happens, e.g., applying standard numerical methods to solve partial differential equations related to financial modeling. To overcome the latter issue, we propose a Deep Learning approach to efficiently approximate nonlinear functions characterizing financial models in a high dimension. In particular, we consider solving the Black–Scholes–Barenblatt non-linear stochastic differential equation via a forward-backward neural network, also calibrating the related stochastic volatility model when dealing with European options. The obtained results exhibit accurate approximations of the implied volatility surface. Specifically, our method seems to significantly reduce the neural network’s training time and the approximation error on the test set. Full article

The convolution method for the numerical solution of forward-backward stochastic differential equations (FBSDEs) was originally formulated using Euler time discretizations and a uniform space grid. In this paper, we utilize a tree-like spatial discretization that approximates the BSDE on the tree, so that no spatial interpolation procedure is necessary. In addition to suppressing extrapolation error, leading to a globally convergent numerical solution for the FBSDE, we provide explicit convergence rates. On this alternative grid the conditional expectations involved in the time discretization of the BSDE are computed using Fourier analysis and the fast Fourier transform (FFT) algorithm. The method is then extended to higher-order time discretizations of FBSDEs. Numerical results demonstrating convergence are presented using a commodity price model, incorporating seasonality, and forward prices. Full article

In this paper, we mainly investigate the weak convergence analysis about the error terms which are determined by the discretization for solving the stochastic differential equation (SDE, for short) in forward-backward stochastic differential equations (FBSDEs, for short), which is on the basis of Itô Taylor expansion, the numerical SDE theory, and numerical FBSDEs theory. Under the weak convergence analysis of FBSDEs, we further establish better error estimates of recent numerical schemes for solving FBSDEs. Full article

We study linear-quadratic stochastic optimal control problems with bilinear state dependence where the underlying stochastic differential equation (SDE) has multiscale features. We show that, in the same way in which the underlying dynamics can be well approximated by a reduced-order dynamics in the scale separation limit (using classical homogenization results), the associated optimal expected cost converges to an effective optimal cost in the scale separation limit. This entails that we can approximate the stochastic optimal control for the whole system by a reduced-order stochastic optimal control, which is easier to compute because of the lower dimensionality of the problem. The approach uses an equivalent formulation of the Hamilton-Jacobi-Bellman (HJB) equation, in terms of forward-backward SDEs (FBSDEs). We exploit the efficient solvability of FBSDEs via a least squares Monte Carlo algorithm and show its applicability by a suitable numerical example. Full article

This paper gives a review of numerical methods for solving the BSDEs, especially, finite difference methods. For numerical methods of finite difference, we should divide them into three branches. Distributed method (or parallel method) should now become a hot topic. It is a key reason we present the review. We give a brief survey on the financial problems. The problems include solution and simulation methods for the BSDEs. We first describe the BSDEs, and then outline the main techniques and main results of the BSDEs. In addition, we compare with the errors between these methods and the Euler method on the BSDEs. Full article