On the exact and -strong simulation of (jump) diffusions

DOI10.3150/14-BEJ676zbMATH Open1343.60099arXiv1302.6964OpenAlexW3101800103MaRDI QIDQ265272FDOQ265272

Authors: Murray Pollock, Adam M. Johansen, Gareth O. Roberts 

Publication date: 1 April 2016

Published in: Bernoulli (Search for Journal in Brave)

Abstract: This paper introduces a framework for simulating finite dimensional representations of (jump) diffusion sample paths over finite intervals, without discretisation error (exactly), in such a way that the sample path can be restored at any finite collection of time points. Within this framework we extend existing exact algorithms and introduce novel adaptive approaches. We consider an application of the methodology developed within this paper which allows the simulation of upper and lower bounding processes which almost surely constrain (jump) diffusion sample paths to any specified tolerance. We demonstrate the efficacy of our approach by showing that with finite computation it is possible to determine whether or not sample paths cross various irregular barriers, simulate to any specified tolerance the first hitting time of the irregular barrier and simulate killed diffusion sample paths.

Full work available at URL: https://arxiv.org/abs/1302.6964

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zbMATH Keywords

jump diffusionssimulationstochastic differential equationsadaptive exact algorithmsbarrier crossing probabilitiesBrownian path space probabilitiesfirst hitting timeskilled diffusions

Mathematics Subject Classification ID

Diffusion processes (60J60) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Sample path properties (60G17) 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 (28)

• ɛ-Strong Simulation of Fractional Brownian Motion and Related Stochastic Differential Equations
• Exact simulation of multidimensional reflected Brownian motion
• Monte Carlo fusion
• Exact Simulation of Brownian Diffusions with Drift Admitting Jumps
• Measuring impact of random jumps without sample path generation
• Consistency of Bayesian nonparametric inference for discretely observed jump diffusions
• Exact simulation of jump-diffusion processes with Monte Carlo applications
• Exact simulation of the first-passage time of diffusions
• Exact simulation of coupled Wright–Fisher diffusions
• Piecewise deterministic Markov processes for continuous-time Monte Carlo
• An Exact Auxiliary Variable Gibbs Sampler for a Class of Diffusions
• Statistical inference for stochastic differential equations
• Exact sampling of jump diffusions
• \(\varepsilon\)-strong simulation of the Brownian path
• Exact sampling of diffusions with a discontinuity in the drift
• Reducing bias in event time simulations via measure changes
• Unbiased simulation of rare events in continuous time
• Exact simulation problems for jump-diffusions
• Exact simulation of final, minimal and maximal values of Brownian motion and jump-diffusions with applications to option pricing
• A recursive representation for decoupling time-state dependent jumps from jump-diffusion processes
• \(\varepsilon\)-strong simulation of the convex minorants of stable processes and meanders
• Simulation of extremes of diffusions
• Strong approximation of Bessel processes
• The computational cost of blocking for sampling discretely observed diffusions
• Exact Monte Carlo simulation of killed diffusions
• Exact simulation of the first passage time through a given level of jump diffusions
• On logarithmically optimal exact simulation of max-stable and related random fields on a compact set
• Numerical aspects of shot noise representation of infinitely divisible laws and related processes

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