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- Title
Moderate deviations for Euler-Maruyama approximation of Hull-White stochastic volatility model.
- Authors
Gao, Yunshi; Jiang, Hui; Wang, Shaochen
- Abstract
We consider the Euler-Maruyama discretization of stochastic volatility model dSt = σtStdWt, dσt = ωσtdZt, t ∈ [0, T], which has been widely used in financial practice, where Wt,Zt, t ∈ [0, T], are two uncorrelated standard Brownian motions. Using asymptotic analysis techniques, the moderate deviation principles for log Sn (or log |Sn| in case Sn is negative) are obtained as n → ∞ under different discretization schemes for the asset price process St and the volatility process σt. Numerical simulations are presented to compare the convergence speeds in different schemes.
- Subjects
DISCRETIZATION methods; STOCHASTIC analysis; EULER method; HULL-White model; COMPUTER simulation; ASYMPTOTIC freedom
- Publication
Frontiers of Mathematics in China, 2018, Vol 13, Issue 4, p809
- ISSN
1673-3452
- Publication type
Article
- DOI
10.1007/s11464-018-0705-0