High order splitting schemes with complex timesteps and their application in mathematical finance

Philipp Doersek and Eskil Hansen

Papers from arXiv.org

Abstract: High order splitting schemes with complex timesteps are applied to Kolmogorov backward equations stemming from stochastic differential equations in Stratonovich form. In the setting of weighted spaces, the necessary analyticity of the split semigroups can be easily proved. A numerical example from interest rate theory, the CIR2 model, is considered. The numerical results are robust for drift-dominated problems, and confirm our theoretical results.

Date: 2012-10
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