Positivity and convergence of the balanced implicit method for the nonlinear jump-extended CIR model

Jianguo Tan, Yang Chen, Weiwei Men and Yongfeng Guo

Mathematics and Computers in Simulation (MATCOM), 2021, vol. 182, issue C, 195-210

Abstract: In this paper, we extend the balanced implicit method (BIM) to nonlinear jump-extended Cox–Ingersoll–Ross (CIR) model. Firstly, we construct the numerical method BIM for this nonlinear jump-extended CIR model and prove the positivity of the proposed method for the model. Furthermore the strong convergence of the BIM is proved in L1 and L2 sense. Finally, we give two examples to illustrate the positivity and convergence of the BIM; numerical results verify the theoretical findings.

Keywords: Jump-extended CIR model; Balanced implicit method; Positivity preserving; Convergence (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:182:y:2021:i:c:p:195-210

DOI: 10.1016/j.matcom.2020.10.024

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