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A new numerical scheme for a class of reflected stochastic differential equations

Author

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  • Yang Xuewei

    (School of Management and Engineering, Nanjing University, Nanjing 210093, P. R. China)

Abstract

We propose a new numerical scheme for a class of one-dimensional reflected stochastic differential equations (SDEs) by virtue of their explicit solutions, which enables us to carry out the simulation of this class of reflected SDEs by simulating some related SDEs without reflections. The new scheme yields the same order of convergence as the scheme for SDEs without reflections.

Suggested Citation

  • Yang Xuewei, 2013. "A new numerical scheme for a class of reflected stochastic differential equations," Monte Carlo Methods and Applications, De Gruyter, vol. 19(4), pages 273-279, December.
    • Handle: RePEc:bpj:mcmeap:v:19:y:2013:i:4:p:273-279:n:2
    DOI: 10.1515/mcma-2013-0011
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    References listed on IDEAS

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    1. Lijun Bo & Dan Tang & Yongjin Wang & Xuewei Yang, 2011. "On the conditional default probability in a regulated market: a structural approach," Quantitative Finance, Taylor & Francis Journals, vol. 11(12), pages 1695-1702.
    2. Lijun Bo & Yongjin Wang & Xuewei Yang, 2010. "Some integral functionals of reflected SDEs and their applications in finance," Quantitative Finance, Taylor & Francis Journals, vol. 11(3), pages 343-348.
    3. Liu, Yingjie, 1995. "Discretization of a class of reflected diffusion processes," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 38(1), pages 103-108.
    4. Kanagawa S. & Saisho Y., 2000. "Strong Approximation of Reflecting Brownian Motion Using Penalty Method and its Application to Cumputer Simulation," Monte Carlo Methods and Applications, De Gruyter, vol. 6(2), pages 105-114, December.
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