Strong order 1/2 convergence of full truncation Euler approximations to the Cox-Ingersoll-Ross process

Andrei Cozma and Christoph Reisinger

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Abstract: We study convergence properties of the full truncation Euler scheme for the Cox-Ingersoll-Ross process in the regime where the boundary point zero is inaccessible. Under some conditions on the model parameters (precisely, when the Feller ratio is greater than three), we establish the strong order 1/2 convergence in $L^{p}$ of the scheme to the exact solution. This is consistent with the optimal rate of strong convergence for Euler approximations of stochastic differential equations with globally Lipschitz coefficients, despite the fact that the diffusion coefficient in the Cox-Ingersoll-Ross model is not Lipschitz.

Date: 2017-04, Revised 2018-10
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