On the Strong Approximation of Pure Jump Processes
This paper constructs strong discrete time approximations for pure jump processes that can be described by stochastic differential equations. Strong approximations based on jump-adapted time discretizations, which produce no discretization bias, are analyzed. The computational complexity of these approximations is proportional to the jump intensity. Furthermore, by exploiting a stochastic expansion for pure jump processes, higher order discrete time approximations, whose computational complexity is not dependent on the jump intensity, are proposed. The strong order of convergence of the resulting schemes is analyzed.
|Date of creation:||01 Jul 2005|
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- Kestutis Kubilius & Eckhard Platen, 2001.
"Rate of Weak Convergence of the Euler Approximation for Diffusion Processes with Jumps,"
Research Paper Series
54, Quantitative Finance Research Centre, University of Technology, Sydney.
- Kubilius Kestutis & Platen Eckhard, 2002. "Rate of Weak Convergence of the Euler Approximation for Diffusion Processes with Jumps," Monte Carlo Methods and Applications, De Gruyter, vol. 8(1), pages 83-96, December.
- Nicolas Merener & Paul Glasserman, 2003. "Numerical solution of jump-diffusion LIBOR market models," Finance and Stochastics, Springer, vol. 7(1), pages 1-27.
- Jarrow, Robert A & Lando, David & Turnbull, Stuart M, 1997. "A Markov Model for the Term Structure of Credit Risk Spreads," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 481-523.
- Nicola Bruti-Liberati & Eckhard Platen, 2005. "On the Strong Approximation of Jump-Diffusion Processes," Research Paper Series 157, Quantitative Finance Research Centre, University of Technology, Sydney.
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