Discretization error of Stochastic Integrals

Masaaki Fukasawa

Papers from arXiv.org

Abstract: Asymptotic error distribution for approximation of a stochastic integral with respect to continuous semimartingale by Riemann sum with general stochastic partition is studied. Effective discretization schemes of which asymptotic conditional mean-squared error attains a lower bound are constructed. Two applications are given; efficient delta hedging strategies with transaction costs and effective discretization schemes for the Euler-Maruyama approximation are constructed.

Date: 2010-04
New Economics Papers: this item is included in nep-ets
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