A third-order weak approximation of multidimensional Itô stochastic differential equations

Naito Riu () and Yamada Toshihiro ()
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Naito Riu: Hitotsubashi University, Tokyo, Japan
Yamada Toshihiro: Hitotsubashi University, Tokyo, Japan

Monte Carlo Methods and Applications, 2019, vol. 25, issue 2, 97-120

Abstract: This paper proposes a new third-order discretization algorithm for multidimensional Itô stochastic differential equations driven by Brownian motions. The scheme is constructed by the Euler–Maruyama scheme with a stochastic weight given by polynomials of Brownian motions, which is simply implemented by a Monte Carlo method. The method of Watanabe distributions on Wiener space is effectively applied in the computation of the polynomial weight of Brownian motions. Numerical examples are shown to confirm the accuracy of the scheme.

Keywords: Stochastic differential equation; weak approximation; third-order method (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/mcma-2019-2036

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