Simulation of stochastic differential equations (Q1335342)

This paper presents the results of numerical experiments conducted to examine the error incurred when using numerical methods to approximate the solutions of initial value problems for Itô stochastic differential equations (SDEs). The mean square error in the approximation is separated into the error in approximating the SDEs by simulation and the error in approximating the solutions of the simulation equations by numerical methods. The paper focuses on the latter error. Nine methods (due to Maruyama, McShane, Mil'shtein, Kloeden and Platen (2), Newton (2), and Saito and Mitsui) are compared using three different stepsizes for five examples (three linear SDEs and two nonlinear SDEs).