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A note on Newton's method for system of stochastic differential equations

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  • Habibi Reza

    (Department of Statistics, Central Bank of Iran, Ferdowsi Ave., 1135931496, Tehran, Iran)

Abstract

Kawabata and Yamada (1991) proposed an implicit formulation for Newton's method for an univariate stochastic differential equation (SDEs). Amano (2009) used the linearized equation technique and proposed explicit formulation for the Newton scheme. In this note, we extend the Newton method for univariate SDEs to the multivariate cases. The error analysis is given and some examples are proposed. Results show that the method works well.

Suggested Citation

  • Habibi Reza, 2012. "A note on Newton's method for system of stochastic differential equations," Monte Carlo Methods and Applications, De Gruyter, vol. 18(4), pages 275-285, December.
    • Handle: RePEc:bpj:mcmeap:v:18:y:2012:i:4:p:275-285:n:1
    DOI: 10.1515/mcma-2012-0010
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    References listed on IDEAS

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    1. Nicolau, João, 2008. "Modeling financial time series through second-order stochastic differential equations," Statistics & Probability Letters, Elsevier, vol. 78(16), pages 2700-2704, November.
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