Work

Lower error bounds and optimality of approximation for jump-diffusion SDEs with discontinuous drift

Year: 2024

Type: article

Abstract: In this paper sharp lower error bounds for numerical methods for jump-diffusion stochastic differential equations (SDEs) with discontinuous drift are proven. The approximation of jump-diffusion SDEs with non-adaptive as well as jump-adapted approximation schemes is studied and lower error bounds of order 3/4 for both classes of approximation schemes are provided. This yields optimality of the transformation-based jump-adapted quasi-Milstein scheme.

Source: BIT Numerical Mathematics

DOI: 10.1007/s10543-024-01036-7

Authors: Paweł Przybyłowicz, Verena Schwarz, Michaela Szölgyenyi

Institutions: AGH University of Krakow, University of Klagenfurt

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,090

Funders: Austrian Science Fund, Alpen-Adria-Universität Klagenfurt