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arXiv · 2512.16418

An Euler scheme for BSDEs via the Wiener chaos decomposition

Pere Diaz-Lozano·Giulia Di Nunno
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Abstract

The Euler scheme is a standard time discretization for BSDEs, but its implementation hinges on approximating conditional expectations and the associated martingale terms at each time step. We propose an implementation based on the Wiener chaos decomposition to approximate these quantities. In contrast to many numerical schemes that rely on a finite-dimensional Markovian representation, our approach accommodates arbitrary $\mathcal{F}_T$-measurable square-integrable terminal conditions. We provide a comprehensive convergence analysis under additional Malliavin regularity assumptions and illustrate the method on several numerical examples, including genuinely non-Markovian problems arising, for instance, in the pricing and hedging of contingent claims under rough-volatility models.

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Pere Diaz-Lozano, Giulia Di Nunno. 2026-09-04. An Euler scheme for BSDEs via the Wiener chaos decomposition. https://arxiv.org/abs/2512.16418

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