On a positivity preserving numerical scheme for jump-extended CIR process: the alpha-stable case

DOI10.1007/S10543-019-00753-8MaRDI QIDQ2273199zbMATH OpenOpenAlexWikidataFDO

Authors Dai Taguchi, Li-Bo Li

Publication date 18 September 2019

Published in BIT (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1804.08070

zbMATH Keywords

Euler-Maruyama schemeimplicit schemealpha-CIR modelsspectrally positive Lévy processHölder continuous coefficientsLévy driven SDEs

Mathematics Subject Classification ID

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)

Abstract: We propose a positivity preserving implicit Euler-Maruyama scheme for a jump-extended Cox-Ingersoll-Ross (CIR) process where the jumps are governed by a compensated spectrally positive $alpha$-stable process for $alphain(1,2)$. Different to the existing positivity preserving numerical schemes for jump-extended CIR or CEV (Constant Elasticity Variance) process, the model considered here has infinite activity jumps. We calculate, in this specific model, the strong rate of convergence and give some numerical illustrations. Jump extended models of this type were initially studied in the context of branching processes and was recently introduced to the financial mathematics literature to model sovereign interest rates, power and energy markets.

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Cites work

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Cited in

(13)

• On the backward Euler method for a generalized Ait-Sahalia-type rate model with Poisson jumps
• An explicit positivity preserving numerical scheme for CIR/CEV type delay models with jump
• A radial basis function -- Hermite finite difference approach to tackle cash-or-nothing and asset-or-nothing options
• Constructing positivity preserving numerical schemes for the two-factor CIR model
• Well-posedness and approximation of some one-dimensional Lévy-driven non-linear SDEs
• Ergodic properties for \(\alpha\)-CIR models and a class of generalized Fleming-Viot processes
• A new numerical scheme for the CIR process
• Convergence and non-negativity preserving of the solution of balanced method for the delay CIR model with jump
• Positivity preserving truncated scheme for the stochastic Lotka-Volterra model with small moment convergence
• ESSAYS ON STRONG AND WEAK APPROXIMATIONS OF STOCHASTIC DIFFERENTIAL EQUATIONS
• Strong convergence in infinite time interval of tamed-adaptive Euler-Maruyama scheme for Lévy-driven SDEs with irregular coefficients
• Alpha-CIR model with branching processes in sovereign interest rate modeling
• Simulation of non-Lipschitz stochastic differential equations driven by \(\alpha\)-stable noise: a method based on deterministic homogenization

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