Delay stochastic interest rate model with jump and strong convergence in Monte Carlo simulations

Emmanuel Coffie

Papers from arXiv.org

Abstract: In this paper, we study analytical properties of the solutions to the generalised delay Ait-Sahalia-type interest rate model with Poisson-driven jump. Since this model does not have explicit solution, we employ several new truncated Euler-Maruyama (EM) techniques to investigate finite time strong convergence theory of the numerical solutions under the local Lipschitz condition plus the Khasminskii-type condition. We justify the strong convergence result for Monte Carlo calibration and valuation of some debt and derivative instruments.

Date: 2021-03, Revised 2021-07
New Economics Papers: this item is included in nep-cmp
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