The weak convergence order of two Euler-type discretization schemes for the log-Heston model

DOI10.1093/IMANUM/DRAC069arXiv2106.10926OpenAlexW3175332949MaRDI QIDQ6190832FDOQ6190832

Authors: A. Neuenkirch 

Publication date: 6 February 2024

Published in: IMA Journal of Numerical Analysis (Search for Journal in Brave)

Abstract: We study the weak convergence order of two Euler-type discretizations of the log-Heston Model where we use symmetrization and absorption, respectively, to prevent the discretization of the underlying CIR process from becoming negative. If the Feller index $u$ of the CIR process satisfies $u>1$, we establish weak convergence order one, while for $uleq1$, we obtain weak convergence order $u-epsilon$ for $epsilon>0$ arbitrarily small. We illustrate our theoretical findings by several numerical examples.

Full work available at URL: https://arxiv.org/abs/2106.10926

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zbMATH Keywords

CIR processEuler schemeHeston modelKolmogorov PDEnon-standard assumptionsdiscretization schemes for SDEs

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Numerical solutions to stochastic differential and integral equations (65C30)

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