A Milstein-based free knot spline approximation for stochastic differential equations

DOI10.1016/J.JCO.2011.03.005MaRDI QIDQ657649zbMATH OpenOpenAlexFDO

Authors Mehdi Slassi

Publication date 10 January 2012

Published in Journal of Complexity (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1306.4457

zbMATH Keywords

Euler schemefree knot splinesMilstein schemepolynomial splinesstochastic differential equations

Mathematics Subject Classification ID

Ordinary differential equations and systems with randomness (34F05) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Brownian motion (60J65) Numerical solutions to stochastic differential and integral equations (65C30)

Abstract: The main purpose of this paper is to give a solution to a long-standing unsolved problem concerning the pathwise strong approximation of stochastic differential equations with respect to the global error in the $L_{infty}$-norm. Typically, one has average supnorm error of order $left(lnk/kight{)}^{1/2}$ for standard approximations of SDEs with $k$ discretization points, like piecewise interpolated Ito-Taylor schemes. On the other hand there is a lower bound, which indicates that the order $1/sqrtk$ is best possible for spline approximation of SDEs with $k$ free knots. The present paper deals with the question of how to get an implementable method, which achieves the order $1/sqrtk$. Up to now, papers with regard to this issue give only pure existence results and so are inappropriate for practical use. In this paper we introduce a nonlinear method for approximating a scalar SDE. The method combines a Milstein scheme with a pieceweise linear interpolation of the Brownian motion with free knots and is easy to implement. Moreover, we establish sharp lower and upper error bounds with specified constants which exhibit the influence of the coefficients of the equation.

Review text

This paper presents a pathwise approximation of scalar stochastic differential equations by polynomial splines with free knots. The pathwise distance between the solution and its approximation is measured globally on the unit interval in the \(L_{\infty}\)-norm, and the \(L_q\)-expectation of this distance is of concern here. An asymptotically optimal spline approximation of the given scalar Brownian motion is first constructed and then used together with a Milstein approximation scheme to obtain the pathwise approximation \(\hat{X}_k\) of the equation. For general stochastic differential equations an upper bound of order \(1/\sqrt{k}\) is obtained with an explicit constant for the approximation error of \(\hat{X}_k\). In the particular case of equations with additive noise this asymptotic upper bound is sharp.

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Cites work

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Cited in

(4)

• Adaptive wavelet methods for the stochastic Poisson equation
• Free-knot spline approximation of stochastic processes
• Free-Knot Spline Approximation of Fractional Brownian Motion
• The optimal free knot spline approximation of stochastic differential equations with additive noise

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