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A transformed jump-adapted backward Euler method for jump-extended CIR and CEV models

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Abstract

A novel time-stepping scheme, called transformed jump-adapted backward Euler method, is developed in this paper to simulate a class of jump-extended CIR and CEV models. The proposed scheme is able to preserve the positivity of the underlying problems. Furthermore, its strong convergence rate of order one is recovered for the considered models with non-Lipschitz diffusion coefficients. Numerical examples are finally reported to confirm our theoretical findings.

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Authors and Affiliations

  1. School of Mathematics, Shandong University, Jinan, 250100, Shandong, China

    Xu Yang

  2. School of Mathematics and Statistics, Central South University, Changsha, 410083, Hunan, China

    Xiaojie Wang

Authors
  1. Xu Yang
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  2. Xiaojie Wang
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Correspondence to Xiaojie Wang.

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Yang, X., Wang, X. A transformed jump-adapted backward Euler method for jump-extended CIR and CEV models. Numer Algor 74, 39–57 (2017). https://doi.org/10.1007/s11075-016-0137-4

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  • DOI: https://doi.org/10.1007/s11075-016-0137-4

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