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I was wondering how to implement a BSDE approximation in R. For example, if I have the toy BSDE $$ dX_t = \mu dt + \sigma dW_t ; X_T\sim N(\mu_1,\sigma_1), $$ for fixed real numbers $\mu,\mu_1,\sigma,\sigma_1$, how can I write simulate this in R?

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  • $\begingroup$ Thanks, but that is an answer to simulating SDEs not BSDEs (they generally require a totally different approach from what I'm reading). $\endgroup$ – AIM_BLB Dec 13 '18 at 19:26
  • $\begingroup$ Sorry you are right, BSDE much more difficult than SDE, I will delete my comment $\endgroup$ – Alex C Dec 13 '18 at 20:12
  • $\begingroup$ @AlexC no worries honestly, I appreciate the input :D $\endgroup$ – AIM_BLB Dec 13 '18 at 20:40
  • $\begingroup$ After looking around I am not convinced your example equation is a properly posed BSDE. A BSDE will have two functions to be determined $X_t$ and $Z_t$, the "output" and "control" function, and you only have $X_t$. $\endgroup$ – Alex C Dec 14 '18 at 16:02

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