Weak and strong approximations of reflected diffusions via penalization methods

Leszek Słomiński

Stochastic Processes and their Applications, 2013, vol. 123, issue 3, 752-763

Abstract: We study approximations of reflected Itô diffusions on convex subsets D of Rd by solutions of stochastic differential equations with penalization terms. We assume that the diffusion coefficients are merely measurable functions. In the case of Lipschitz continuous coefficients we give the rate of Lp approximation for every p≥1. We prove that if D is a convex polyhedron then the rate is O((lnnn)1/2), and in the general case the rate is O((lnnn)1/4).

Keywords: Reflected diffusions; Penalization methods (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:spapps:v:123:y:2013:i:3:p:752-763

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DOI: 10.1016/j.spa.2012.10.006

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