Stochastic differential equations with Poisson driven jumps of random magnitude are popular as models in mathematical finance. Strong, or pathwise, simulation of these models is required in various settings and long time stability is desirable to control error growth. Here, we examine strong convergence and mean-square stability of a class of implicit numerical methods, proving both positive and negative results. The analysis is backed up with numerical experiments.
|Number of pages||17|
|Journal||Discrete and Continuous Dynamical Systems - Series B|
|Publication status||Published - Jan 2008|
- mean-square stability
- backward Euler
Higham, D. J., & Chalmers, G. D. (2008). Convergence and stability analysis for implicit simulations of stochastic differential equations with random jump magnitudes. Discrete and Continuous Dynamical Systems - Series B, 9(1), 47-64.