A Milstein-type scheme without Lévy area terms for SDEs driven by fractional Brownian motion (Q424708): Difference between revisions

This paper is devoted to the numerical approximation of the following differential equation \[ Y_t=a+\sum_{i=1}^m\int_0^t\sigma^{(i)}(Y_u)dB_u^{(i)} \quad t\in [0,T],\;a\in \mathbb{R}^d, \] where \(\sigma=(\sigma^{(1)},\dots,\sigma^{(m)})\) is smooth and \(B=(B^{(1)},\dots,B^{(m)})\) is a \(m\)-dimensional fractional Brownian motion with Hurst parameter \(H>1/3\). As the Euler scheme is not appropriate for \(1/3<H<1/2\), the authors propose a scheme \(Z^n\) of Milstein type where the iterated integrals are replaced by simple products of increments. If \(1/3<\gamma<H\), they obtain an a.s. error of order \(\sqrt{\log n}\;n^{-(H-\gamma)}\) in the \(\gamma\)-Hölder norm. A first step in the proof consists in approximating \(Y\) by its Wong-Zakai approximation \(\overline{Z}^n\). In the second step, \(Z^n\) is considered as a second-order Taylor scheme for \(\overline{Z}^n\). Both steps use a theorem on Lipschitz continuity of solutions of rough differential equations and their Lévy areas.