Sharp L¹-Approximation of the log-Heston SDE by Euler-type methods

Abstract: We study the

L^{1}

-approximation of the log-Heston SDE at equidistant time points by Euler-type methods. We establish the convergence order

1 / 2 - e p s i l o n

for

e p s i l o n > 0

arbitrarily small, if the Feller index

u

of the underlying CIR process satisfies

u > 1

. Thus, we recover the standard convergence order of the Euler scheme for SDEs with globally Lipschitz coefficients. Moreover, we discuss the case

u l e q 1

and illustrate our findings by several numerical examples.

This page was built for publication: Sharp $L^1$-Approximation of the log-Heston SDE by Euler-type methods