Weak Approximation of Cir Equation by Discrete Random Variables
نویسندگان
چکیده
For the CIR equation dXt = (θ − kXt) dt + σ √ Xt dBt, we propose positive weak firstand second-order approximations that use, at each step, generation of discrete (respectively twoand three-valued) random variables (Theorems 3 and 4). The equation is split into deterministic part dDt = (θ − kDt) dt, which is solved exactly, and stochastic part dSt = σ √ St dBt, which is actually approximated in distribution. MSC: 65H35, 65C30
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