New Paper Proves Convergence for Coupled FBSDEs via Differentiation

A new research paper posted on arXiv proposes a convergence result for the Markovian iteration method applied to coupled forward-backward stochastic differential equations (FBSDEs). The authors use a differentiation approach to establish the convergence, addressing a class of equations widely used in stochastic control, mathematical finance, and optimal stopping problems. Coupled FBSDEs appear in models for option pricing with stochastic volatility, principal-agent problems, and systemic risk. The paper provides a theoretical foundation for iterative numerical schemes that can be used in these applications. The full preprint is available under arXiv identifier 2504.02814.