Strong convergence of Euler-type methods for nonlinear stochastic differential equations

D.J. Higham, X. Mao, A.M. Stuart

Research output: Contribution to journalArticle

363 Citations (Scopus)

Abstract

Traditional finite-time convergence theory for numerical methods applied to stochastic differential equations (SDEs) requires a global Lipschitz assumption on the drift and diffusion coefficients. In practice, many important SDE models satisfy only a local Lipschitz property and, since Brownian paths can make arbitrarily large excursions, the global Lipschitz-based theory is not directly relevant. In this work we prove strong convergence results under less restrictive conditions. First, we give a convergence result for Euler--Maruyama requiring only that the SDE is locally Lipschitz and that the pth moments of the exact and numerical solution are bounded for some p >2. As an application of this general theory we show that an implicit variant of Euler--Maruyama converges if the diffusion coefficient is globally Lipschitz, but the drift coefficient satisfies only a one-sided Lipschitz condition; this is achieved by showing that the implicit method has bounded moments and may be viewed as an Euler--Maruyama approximation to a perturbed SDE of the same form. Second, we show that the optimal rate of convergence can be recovered if the drift coefficient is also assumed to behave like a polynomial.
Original languageEnglish
Pages (from-to)1041-1063
Number of pages22
JournalSIAM Journal on Numerical Analysis
Volume40
Issue number3
DOIs
Publication statusPublished - 2002

Keywords

  • finite-time convergence
  • nonlinearity
  • computer science
  • applied mathematics

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