Exact Simulation Problems for Jump-Diffusions

Flávio B. Gonçalves () and Gareth O. Roberts ()
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Flávio B. Gonçalves: Universidade Federal de Minas Gerais
Gareth O. Roberts: University of Warwick

Methodology and Computing in Applied Probability, 2014, vol. 16, issue 4, 907-930

Abstract: Abstract Exact simulation of SDEs is a very important and challenging problem. In this paper we discuss exact simulation problems for jump-diffusion processes. Motivated by statistical applications, our main contribution is to propose an algorithm that performs exact simulation of a class of jump-diffusion bridges. We also present and discuss the existing methods for forward simulation and propose an extension of one of them to account for unbounded jump rate. Finally, the exact algorithms are compared to competing non-exact ones in some simulated examples.

Keywords: Jump-diffusions; Exact simulation; Jump-diffusion bridge; 60-08 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11009-013-9330-2

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