Simulation methods and error analysis for trawl processes and ambit fields

Dan Leonte and Almut Veraart

Mathematics and Computers in Simulation (MATCOM), 2024, vol. 215, issue C, 518-542

Abstract: Trawl processes are continuous-time, stationary and infinitely divisible processes which can describe a wide range of possible serial correlation patterns in data. In this paper, we introduce new simulation algorithms for trawl processes with monotonic trawl functions and establish their error bounds and convergence properties. We extensively analyse the computational complexity and practical implementation of these algorithms and discuss which one to use depending on the type of Lévy basis. We extend the above methodology to the simulation of kernel-weighted, volatility modulated trawl processes and develop a new simulation algorithm for ambit fields. Finally, we discuss how simulation schemes previously described in the literature can be combined with our methods for decreased computational cost.

Keywords: Ambit fields; Infinite divisibility; Lévy bases; Numerical study of stochastic processes; Serial correlation; Stochastic simulation; Trawl processes (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:215:y:2024:i:c:p:518-542

DOI: 10.1016/j.matcom.2023.07.018

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