A novel approach to construct numerical methods for stochastic differential equations

DOI10.1007/S11075-013-9724-9MaRDI QIDQ2453472zbMATH OpenOpenAlexFDO

Authors Nikolaos Halidias

Publication date 6 June 2014

Published in Numerical Algorithms (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1303.1621

zbMATH Keywords

explicit numerical schemesuper linear stochastic differential equation

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: In this paper we propose a new numerical method for solving stochastic differential equations (SDEs). As an application of this method we propose an explicit numerical scheme for a super linear SDE for which the usual Euler scheme diverges.

Review text

The author presents an approach to numerically solve a scalar stochastic differential equation of the form \[ x_t = x_0 +\int_0^t a(x_s)\,ds+\int_0^t b(x_s) \,dW_s. \] The method works by finding a semi-discretisation \[ y_t = y_{t_k}+\int_{t_k}^t f(y_s,y_{t_k})\,ds +\int_{t_k}^t g(y_s,y_{t_k})\,dWs \] for \(t\in [t_k,t_{k+1}]\) on a grid \(0=t_0<t_1 \dots t_n=T\) such that \(f(x,x) = a(x)\) and \(g(x,x)=b(x)\) and that the semi-discretization possesses an explicit solution. Methods of this form are explicit and contain, e.g., the forward Euler method for \(f(y,x)=a(x)\) and \(g(y,x)=b(x)\). Then, under local Lipschitz conditions on \(f\) and \(g\) and square-integrability of the exact solution and the semi-discretization, it is proven that the semi-discretization converges to the exact solution in the mean-square sense. Furthermore, an explicit example for a method is presented and also a numerical example (a super linear stochastic differential equation) is considered comparing the new method with the tamed Euler scheme.

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Cites work

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Cited in

(24)

• Approximating explicitly the mean-reverting CEV process
• Construction of positivity preserving numerical method for stochastic age-dependent population equations
• A semi-discretization method for delayed stochastic systems
• The semi-discrete method for the approximation of the solution of stochastic differential equations
• Positivity preserving logarithmic Euler-Maruyama type scheme for stochastic differential equations
• A note on the asymptotic stability of the semi-discrete method for stochastic differential equations
• An explicit positivity preserving numerical scheme for CIR/CEV type delay models with jump
• A method for the calculation of characteristics for the solution to stochastic differential equations
• A new solution method for stochastic differential equations via collocation approach
• Exact difference schemes for stochastic differential equations
• On the construction of boundary preserving numerical schemes
• scientific article; zbMATH DE number 3984247 (Why is no real title available?)
• Exponential integrability properties of numerical approximation processes for nonlinear stochastic differential equations
• Computing survival probabilities based on stochastic differential models
• scientific article; zbMATH DE number 4003481 (Why is no real title available?)
• Construction of positivity preserving numerical schemes for some multidimensional stochastic differential equations
• scientific article; zbMATH DE number 919682 (Why is no real title available?)
• An explicit and positivity preserving numerical scheme for the mean reverting CEV model
• A new numerical scheme for the CIR process
• A new numerical scheme for a class of reflected stochastic differential equations
• The exponential integrability properties and strong convergence rate of an explicit Euler's method for highly nonlinear stochastic differential equations
• Boundary preservation and convergence of the linearly implicit Euler method with truncated Wiener process for the Wright-Fisher model
• On the numerical solution of some non-linear stochastic differential equations using the semi-discrete method
• A numerical method for some stochastic differential equations with multiplicative noise

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