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

DOI10.1007/S10543-019-00753-8zbMATH Open1480.65017arXiv1804.08070OpenAlexW2964281083WikidataQ127963792 ScholiaQ127963792MaRDI QIDQ2273199FDOQ2273199

Authors: Dai Taguchi, Li-Bo Li 

Publication date: 18 September 2019

Published in: BIT (Search for Journal in Brave)

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.

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

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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)

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Cited In (13)

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

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