Strong order-one-half convergence of the projected Euler–Maruyama method for the Cox–Ingersoll–Ross model

Yiyi Tang

Journal of Computational Finance

Abstract: The Cox–Ingersoll–Ross model is widely used in financial engineering for the pricing of interest rate derivatives. Various Euler–Maruyama- and Milstein-type discretization schemes have been developed to approximate its solution, among which the full truncation Euler–Maruyama method is popular in practice and is known to be ð ’§ð ‘ -strongly convergent with order 1/2 under certain parameter conditions. In this paper, we investigate the projected Euler–Maruyama method for solving the Cox–Ingersoll–Ross model. By combining the projection technique with the normalized error analysis introduced by Cozma and Reisinger, we establish the ð ’§ð ‘ -strong convergence of the projected Euler–Maruyama method with order 1/2 over a significantly wide range of parameter settings.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/node/7963116 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ0:7963116

Access Statistics for this article

More articles in Journal of Computational Finance from Journal of Computational Finance
Bibliographic data for series maintained by Thomas Paine ().