Qualitative properties of different numerical methods for the inhomogeneous geometric Brownian motion
From MaRDI portal
Publication:2074883
DOI10.1016/J.CAM.2021.113951zbMATH Open1490.60209arXiv2003.10193OpenAlexW4200101867MaRDI QIDQ2074883FDOQ2074883
Authors: Irene Tubikanec, Massimiliano Tamborrino, Evelyn Buckwar, Petr Lansky 
Publication date: 11 February 2022
Published in: Journal of Computational and Applied Mathematics (Search for Journal in Brave)
Abstract: We provide a comparative analysis of qualitative features of different numerical methods for the inhomogeneous geometric Brownian motion (IGBM). The conditional and asymptotic mean and variance of the IGBM are known and the process can be characterised according to Feller's boundary classification. We compare the frequently used Euler-Maruyama and Milstein methods, two Lie-Trotter and two Strang splitting schemes and two methods based on the ordinary differential equation (ODE) approach, namely the classical Wong-Zakai approximation and the recently proposed log-ODE scheme. First, we prove that, in contrast to the Euler-Maruyama and Milstein schemes, the splitting and ODE schemes preserve the boundary properties of the process, independently of the choice of the time discretisation step. Second, we derive closed-form expressions for the conditional and asymptotic means and variances of all considered schemes and analyse the resulting biases. While the Euler-Maruyama and Milstein schemes are the only methods which may have an asymptotically unbiased mean, the splitting and ODE schemes perform better in terms of variance preservation. The Strang schemes outperform the Lie-Trotter splittings, and the log-ODE scheme the classical ODE method. The mean and variance biases of the log-ODE scheme are very small for many relevant parameter settings. However, in some situations the two derived Strang splittings may be a better alternative, one of them requiring considerably less computational effort than the log-ODE method. The proposed analysis may be carried out in a similar fashion on other numerical methods and stochastic differential equations with comparable features.
Full work available at URL: https://arxiv.org/abs/2003.10193
Recommendations
GARCH modelboundary preservationFeller's boundary classificationlog-ODE methodmoment preservationnumerical splitting schemes
Probabilistic models, generic numerical methods in probability and statistics (65C20) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Numerical solutions to stochastic differential and integral equations (65C30)
Cites Work
- Two singular diffusion problems
- A theory of the term structure of interest rates
- THE SPECTRAL DECOMPOSITION OF THE OPTION VALUE
- On a stochastic difference equation and a representation of non–negative infinitely divisible random variables
- Title not available (Why is that?)
- Title not available (Why is that?)
- Higher-order implicit strong numerical schemes for stochastic differential equations
- On the Product of Semi-Groups of Operators
- The Distribution of a Perpetuity, with Applications to Risk Theory and Pension Funding
- Title not available (Why is that?)
- Geometric Numerical Integration
- On the comparison of Feller and Ornstein-Uhlenbeck models for neural activity
- Estimation of the input parameters in the Feller neuronal model
- The effect of mean reversion on investment under uncertainty
- Mean-square stability of numerical schemes for stochastic differential systems
- A non-standard-Euler-Maruyama scheme
- Stochastic differential equations in infinite dimensions with applications to stochastic partial differential equations
- Towards a systematic linear stability analysis of numerical methods for systems of stochastic differential equations
- On the discretization schemes for the CIR (and Bessel squared) processes
- Splitting methods
- Mean-square stability analysis of numerical schemes for stochastic differential systems
- A structural analysis of asymptotic mean-square stability for multi-dimensional linear stochastic differential systems
- Mean-Square and Asymptotic Stability of the Stochastic Theta Method
- Stability Analysis of Numerical Schemes for Stochastic Differential Equations
- On the Convergence of Ordinary Integrals to Stochastic Integrals
- A comparative linear mean-square stability analysis of Maruyama- and Milstein-type methods
- Splitting and composition methods for explicit time dependence in separable dynamical systems
- First-passage-time densities for time-non-homogeneous diffusion processes
- Title not available (Why is that?)
- On the relation between ordinary and stochastic differential equations
- A Theorem on the Order of Convergence of Mean-Square Approximations of Solutions of Systems of Stochastic Differential Equations
- On the Construction and Comparison of Difference Schemes
- Splitting for Dissipative Particle Dynamics
- The Pearson Diffusions: A Class of Statistically Tractable Diffusion Processes
- A Lie algebraic approach to numerical integration of stochastic differential equations
- Boundary Preserving Semianalytic Numerical Algorithms for Stochastic Differential Equations
- Families of efficient second order Runge-Kutta methods for the weak approximation of Itô stochastic differential equations
- A General Implicit Splitting for Stabilizing Numerical Simulations of Itô Stochastic Differential Equations
- On weak approximations of \((a, b)\)-invariant diffusions
- The ordinary differential equation approach to asymptotically efficient schemes for solution of stochastic differential equations
- Splitting integrators for the stochastic Landau-Lifshitz equation
- High-order approximation of Pearson diffusion processes
- Hypoelliptic diffusions: filtering and inference from complete and partial observations
- A real options approach to the valuation of a forestry investment.
- Quasi-symplectic methods for Langevin-type equations
- An option pricing formula for the GARCH diffusion model
- Structure preserving stochastic integration schemes in interest rate derivative modeling
- An introduction to statistical computing. A simulation-based approach
- Molecular dynamics. With deterministic and stochastic numerical methods
- Stochastic Lie Group Integrators
- Euler schemes and half-space approximation for the simulation of diffusion in a domain
- A boundary preserving numerical scheme for the Wright-Fisher model
- A stochastic version of the jansen and rit neural mass model: analysis and numerics
- On two diffusion neuronal models with multiplicative noise: the mean first-passage time properties
- An optimal polynomial approximation of Brownian motion
- Analysis of some splitting schemes for the stochastic Allen-Cahn equation
- Spectral density-based and measure-preserving ABC for partially observed diffusion processes. An illustration on Hamiltonian SDEs
- Chi-square simulation of the CIR process and the Heston model
Cited In (7)
- Numerical simulation of multi dimensional reflecting geometrical Brownian motion and its application to mathematical finance
- Numerical conservation issues for jump Pearson diffusions
- Analysis of a positivity-preserving splitting scheme for some semilinear stochastic heat equations
- High Order Splitting Methods for SDEs Satisfying a Commutativity Condition
- Exact solution of interacting particle systems related to random matrices
- A long term analysis of stochastic theta methods for mean reverting linear process with jumps
- A splitting method for SDEs with locally Lipschitz drift: illustration on the FitzHugh-Nagumo model
This page was built for publication: Qualitative properties of different numerical methods for the inhomogeneous geometric Brownian motion
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2074883)
