Mathematics of Computation

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ISSN 1088-6842(e) ISSN 0025-5718(p)

High order discretization schemes for the CIR process: Application to affine term structure and Heston models

Author(s): Aurélien Alfonsi.
Journal: Math. Comp. 79 (2010), 209-237.
MSC (2000): Primary 60H35, 65C30; Secondary 91B70
Posted: June 15, 2009
MathSciNet review: 2552224
Retrieve article in: PDF

Abstract | References | Similar articles | Additional information

Abstract: This paper presents weak second and third order schemes for the Cox-Ingersoll-Ross (CIR) process, without any restriction on its parameters. At the same time, it gives a general recursive construction method for getting weak second order schemes that extend the one introduced by Ninomiya and Victoir. Combine both these results, this allows us to propose a second order scheme for more general affine diffusions. Simulation examples are given to illustrate the convergence of these schemes on CIR and Heston models.

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