Continuous and Discrete Time Modeling

Carl Chiarella, Willi Semmler, Chih-Ying Hsiao and Lebogang Mateane
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Chih-Ying Hsiao: University of Technology

Chapter Chapter 7 in Sustainable Asset Accumulation and Dynamic Portfolio Decisions, 2016, pp 115-137 from Springer

Abstract: Abstract As mentioned, the transition of a continuous time model into a discrete time model is not an easy issue. We discuss here various discretization procedures to turn continuous time into discrete time models. There are many methods to convert continuous time models into discrete time variants. The main discretization methods are the Euler method, the Milstein method and a new local linearization method. All those will be illustrated here to obtain discrete-time approximate models.

Keywords: Stochastic Differential Equation; Forecast Error; Euler Method; Discrete Time Model; Short Term Interest Rate (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:dymchp:978-3-662-49229-1_7

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DOI: 10.1007/978-3-662-49229-1_7

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