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Numerical Methods for Stochastic Differential Equations

In: Quantitative Methods for Finance with Simulations II

Author

Listed:
  • Geon Ho Choe

    (Korea Advanced Institute of Science and Technology, Department of Mathematical Sciences)

Abstract

In this chapter, we introduce numerical methods for solving stochastic differential equations. Stochastic differential equations (SDEs) including the geometric Brownian motion are widely used in the natural sciences and engineering. In finance they are used to model movements of risky asset prices and interest rates. The solutions of SDEs are of a different character compared with the solutions of classical ordinary and partial differential equations in the sense that the solutions of SDEs are stochastic processes. Thus it is a nontrivial matter to measure the efficiency of a given algorithm for finding numerical solutions.

Suggested Citation

  • Geon Ho Choe, 2026. "Numerical Methods for Stochastic Differential Equations," Springer Texts in Business and Economics, in: Quantitative Methods for Finance with Simulations II, chapter 0, pages 147-166, Springer.
    • Handle: RePEc:spr:sptchp:978-3-032-12331-2_8
    DOI: 10.1007/978-3-032-12331-2_8
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