scholarly journals Invariant Discretization Schemes Using Evolution-Projection Techniques

2013 ◽  
Author(s):  
Alexander Bihlo
Keyword(s):  
Discretization Schemes ◽  
Projection Techniques

scholarly journals A LOW-BIAS SIMULATION SCHEME FOR THE SABR STOCHASTIC VOLATILITY MODEL

2012 ◽  
Vol 15 (02) ◽  
pp. 1250016 ◽  
Author(s):  
BIN CHEN ◽  
CORNELIS W. OOSTERLEE ◽  
HANS VAN DER WEIDE
Keyword(s):  
Stochastic Volatility ◽  
Asset Price ◽  
Realistic Model ◽  
Stochastic Volatility Model ◽  
Model Parameters ◽  
Fixed Income ◽  
Financial Industry ◽  
Volatility Model ◽  
Discretization Schemes ◽  
Simulation Scheme

The Stochastic Alpha Beta Rho Stochastic Volatility (SABR-SV) model is widely used in the financial industry for the pricing of fixed income instruments. In this paper we develop a low-bias simulation scheme for the SABR-SV model, which deals efficiently with (undesired) possible negative values in the asset price process, the martingale property of the discrete scheme and the discretization bias of commonly used Euler discretization schemes. The proposed algorithm is based the analytic properties of the governing distribution. Experiments with realistic model parameters show that this scheme is robust for interest rate valuation.

scholarly journals Modeling of a diffusion with aggregation: rigorous derivation and numerical simulation

2018 ◽  
Vol 52 (2) ◽  
pp. 567-593 ◽  
Author(s):  
Li Chen ◽  
Simone Göttlich ◽  
Stephan Knapp
Keyword(s):  
Particle System ◽  
Rigorous Derivation ◽  
Uniform Estimates ◽  
Estimates Of Solutions ◽  
Delta Potential ◽  
Intermediate Particle ◽  
Stochastic Particle System ◽  
Aggregation Equation ◽  
Discretization Schemes ◽  
Theoretical Results

In this paper, a diffusion-aggregation equation with delta potential is introduced. Based on the global existence and uniform estimates of solutions to the diffusion-aggregation equation, we also provide the rigorous derivation from a stochastic particle system while introducing an intermediate particle system with smooth interaction potential. The theoretical results are compared to numerical simulations relying on suitable discretization schemes for the microscopic and macroscopic level. In particular, the regime switch where the analytic theory fails is numerically analyzed very carefully and allows for a better understanding of the equation.

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