Strong convergence rates for Markovian representations of fractional processes

Philipp Harms

Papers from arXiv.org

Abstract: Many fractional processes can be represented as an integral over a family of Ornstein-Uhlenbeck processes. This representation naturally lends itself to numerical discretizations, which are shown in this paper to have strong convergence rates of arbitrarily high polynomial order. This explains the potential, but also some limitations of such representations as the basis of Monte Carlo schemes for fractional volatility models such as the rough Bergomi model.

Date: 2019-02, Revised 2020-08
New Economics Papers: this item is included in nep-cmp
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