Applications of the Balanced Method to Stochastic Differential Equations in Filtering
AbstractThe paper studies the application of the balanced method in hidden Markov chain filtering, an important practical area that requires the strong numerical solution of stochstic differential equations with multiplicative noise. Numerical experiments are conducted to enable comparisons between the balanced method and standard alternative methods in the context of filtering. Both the mean global error and the sample path properties of the approximate solutions are compared in a numerical study.
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Bibliographic InfoPaper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 16.
Date of creation: 01 Aug 1999
Date of revision:
stochastic differential equations; strong numerical approximations; balanced method; hidden Markov chain filtering;
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- Eckhard Platen & Wolfgang Runggaldier, 2002.
"A Benchmark Approach to Filtering in Finance,"
Research Paper Series
77, Quantitative Finance Research Centre, University of Technology, Sydney.
- Eckhard Platen & Renata Rendek, 2009. "Quasi-exact Approximation of Hidden Markov Chain Filters," Research Paper Series 258, Quantitative Finance Research Centre, University of Technology, Sydney.
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