Advances in Applied Probability
- Adv. in Appl. Probab.
- Volume 47, Number 4 (2015), 1132-1156.
Uniform approximation of the Cox-Ingersoll-Ross process
The Doss-Sussmann (DS) approach is used for uniform simulation of the Cox-Ingersoll-Ross (CIR) process. The DS formalism allows us to express trajectories of the CIR process through solutions of some ordinary differential equation (ODE) depending on realizations of a Wiener process involved. By simulating the first-passage times of the increments of the Wiener process to the boundary of an interval and solving the ODE, we uniformly approximate the trajectories of the CIR process. In this respect special attention is payed to simulation of trajectories near 0. From a conceptual point of view the proposed method gives a better quality of approximation (from a pathwise point of view) than standard, even exact, simulation of the stochastic differential equation at some deterministic time grid.
Adv. in Appl. Probab., Volume 47, Number 4 (2015), 1132-1156.
First available in Project Euclid: 11 December 2015
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Milstein, Grigori N.; Schoenmakers, John. Uniform approximation of the Cox-Ingersoll-Ross process. Adv. in Appl. Probab. 47 (2015), no. 4, 1132--1156. doi:10.1239/aap/1449859803. https://projecteuclid.org/euclid.aap/1449859803