On irregular functionals of SDEs and the Euler scheme
From MaRDI portal
Functions of bounded variation, generalizations (26A45) Rate of convergence, degree of approximation (41A25) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Probabilistic models, generic numerical methods in probability and statistics (65C20) Numerical solutions to stochastic differential and integral equations (65C30)
Abstract: We consider upper bounds for the approximation error E|g(X)-g(hat X)|^p, where X and hat X are random variables such that hat X is an approximation of X in the L_p-norm, and the function g belongs to certain function classes, which contain e.g. functions of bounded variation. We apply the results to the approximations of a solution of a stochastic differential equation at time T by the Euler and Milstein schemes. For the Euler scheme we provide also a lower bound.
The main result of the paper contains a general principle that gives a sharp upper bound for the functional \({E}| g(X)-g(\hat{X})| ^p\) in terms of moments of \(X-\hat{X}\). Here \(X\) and \(\hat{X}\) are random variables and \(g\) is a function of bounded variation, e.g. the payoff of the binary option. The convergence result for the functions automatically gives a convergence rate for the functional, and it is arbitrary close to the original rate. The results are applied to the approximation of a solution to a stochastic differential equation by the Euler scheme, and it is demonstrated that the approximation of the payoff of the binary option has asymptotically sharp strong convergence rate 1/2. This result, in turn, is applied to the multilevel Monte Carlo method, and the improvement in the mean square error of the multilevel estimator is obtained.
Recommendations
- On generalized bounded variation and approximation of SDEs
- Convergence rate of Euler scheme for stochastic differential equations: Functionals of solutions
- The law of the Euler scheme for stochastic differential equations. I: Convergence rate of the distribution function
- Rate of Convergence of the Euler Approximation for Diffusion Processes
- Approximation for non-smooth functionals of stochastic differential equations with irregular drift
Cites work
- A note on Euler's approximations
- Analyzing multi-level Monte Carlo for options with non-globally Lipschitz payoff
- Asymptotic error distributions for the Euler method for stochastic differential equations
- Estimation of densities and applications
- Euler scheme and tempered distributions
- Existence of strong solutions for Itô's stochastic equations via approximations
- Expansion of the global error for numerical schemes solving stochastic differential equations
- Generalized fractional smoothness and L_p-variation of BSDEs with non-Lipschitz terminal condition
- Higher-order implicit strong numerical schemes for stochastic differential equations
- scientific article; zbMATH DE number 51724 (Why is no real title available?)
- scientific article; zbMATH DE number 192914 (Why is no real title available?)
- scientific article; zbMATH DE number 699438 (Why is no real title available?)
- scientific article; zbMATH DE number 3437452 (Why is no real title available?)
- scientific article; zbMATH DE number 2000348 (Why is no real title available?)
- scientific article; zbMATH DE number 3233089 (Why is no real title available?)
- Improved multilevel Monte Carlo convergence using the Milstein scheme
- Linear vs standard information for scalar stochastic differential equations
- Multilevel Monte Carlo Path Simulation
- On the global error of Itô--Taylor schemes for strong approximation of scalar stochastic differential equations
- Optimal pointwise approximation of SDEs based on Brownian motion at discrete points
- Statistical Romberg extrapolation: a new variance reduction method and applications to option pricing
- Strong Convergence of Euler-Type Methods for Nonlinear Stochastic Differential Equations
- The law of the Euler scheme for stochastic differential equations. I: Convergence rate of the distribution function
- The optimal discretization of stochastic differential equations
- The optimal uniform approximation of systems of stochastic differential equations
Cited in
(52)- Convergence rate of Euler scheme for stochastic differential equations: Functionals of solutions
- Multilevel rejection sampling for approximate Bayesian computation
- Approximation of Euler-Maruyama for one-dimensional stochastic differential equations involving the maximum process
- On the Euler-Maruyama scheme for SDEs with bounded variation and Hölder continuous coefficients
- Weak rate of convergence of the Euler-Maruyama scheme for stochastic differential equations with non-regular drift
- On the strong convergence rate for the Euler-Maruyama scheme of one-dimensional SDEs with irregular diffusion coefficient and local time
- Weighted bounded mean oscillation applied to backward stochastic differential equations
- Malliavin smoothness on the Lévy space with Hölder continuous or \(B V\) functionals
- Zooming-in on a Lévy process: failure to observe threshold exceedance over a dense grid
- Weak error for nested multilevel Monte Carlo
- Stopped diffusion processes: boundary corrections and overshoot
- Pathwise Stieltjes integrals of discontinuously evaluated stochastic processes
- On pathwise Riemann-Stieltjes integrals
- Multilevel Monte Carlo for exponential Lévy models
- Weak approximation of averaged diffusion processes
- Non-asymptotic error bounds for the multilevel Monte Carlo Euler method applied to SDEs with constant diffusion coefficient
- An introduction to multilevel Monte Carlo for option valuation
- Multilevel ensemble Kalman filtering
- Multilevel Monte Carlo approximation of distribution functions and densities
- On the acceleration of the multi-level Monte Carlo method
- Construction of a mean square error adaptive Euler-Maruyama method with applications in multilevel Monte Carlo
- Approximation of Euler-Maruyama for one-dimensional stochastic differential equations involving the local times of the unknown process
- Dirichlet forms methods: an application to the propagation of the error due to the Euler scheme
- On generalized bounded variation and approximation of SDEs
- Generalized fractional smoothness and L_p-variation of BSDEs with non-Lipschitz terminal condition
- Multilevel Monte Carlo approximation of functions
- An arbitrary high order weak approximation of SDE and Malliavin Monte Carlo: analysis of probability distribution functions
- Deep backward schemes for high-dimensional nonlinear PDEs
- Stochastic approximation schemes for economic capital and risk margin computations
- Strong convergence for Euler-Maruyama and Milstein schemes with asymptotic method
- Convergence rate of Euler scheme for time-inhomogeneous SDEs involving the local time of the unknown process
- \(L^q\)-error estimates for approximation of irregular functionals of random vectors
- Adaptive multilevel Monte Carlo for probabilities
- Decoupling on the Wiener space, related Besov spaces, and applications to BSDEs
- Constructive Quantization and Multilevel Algorithms for Quadrature of Stochastic Differential Equations
- Stability problem for one-dimensional stochastic differential equations with discontinuous drift
- A multilevel Monte Carlo algorithm for Lévy-driven stochastic differential equations
- A multilevel Monte Carlo method for computing failure probabilities
- Weak convergence of error processes in discretizations of stochastic integrals and Besov spaces
- Multilevel Monte Carlo with numerical smoothing for robust and efficient computation of probabilities and densities
- Option pricing in sandwiched Volterra volatility model
- Sandwiched Volterra volatility model: Markovian approximations and hedging
- Caputo fractional stochastic differential equations: Lipschitz continuity in the fractional order
- MLMC techniques for discontinuous functions
- A class of numerical algorithms for stochastic differential equations with randomly varying truncations
- Besov regularity of a density of SDEs with superlinear growth coefficients and application to numerical analysis
- Multilevel Monte Carlo simulation of Coulomb collisions
- A class of stochastic Runge-Kutta methods for stochastic differential equations converging uniformly with order 1 in L^p-norm
- Optimal reinsurance and investment via stochastic projected gradient method based on Malliavin calculus
- Multilevel Monte Carlo methods and lower-upper bounds in initial margin computations
- Analyzing multi-level Monte Carlo for options with non-globally Lipschitz payoff
- Multi-level Monte Carlo algorithms for infinite-dimensional integration on \(\mathbb R^{\mathbb N}\)
This page was built for publication: On irregular functionals of SDEs and the Euler scheme
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q964680)
