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Exact simulation of jump-diffusion processes with Monte Carlo applications
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Casella, Bruno and Roberts, Gareth O. (2008) Exact simulation of jump-diffusion processes with Monte Carlo applications. Working Paper. Coventry: University of Warwick. Centre for Research in Statistical Methodology. Working papers, Vol.2008 (No.19).
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Abstract
We introduce a novel algorithm (JEA) to simulate exactly from a
class of one-dimensional jump-diffusion processes with state-dependent
intensity. The simulation of the continuous component builds on the
recent Exact Algorithm ((1)). The simulation of the jump component
instead employes a thinning algorithm with stochastic acceptance
probabilities in the spirit of (14). In turn JEA allows unbiased Monte
Carlo simulation of a wide class of functionals of the process’ trajectory, including discrete averages, max/min, crossing events, hitting
times. Our numerical experiments show that the method outperforms
Monte Carlo methods based on the Euler discretization.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | Q Science > QA Mathematics | ||||
Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||
Library of Congress Subject Headings (LCSH): | Diffusion processes | ||||
Series Name: | Working papers | ||||
Publisher: | University of Warwick. Centre for Research in Statistical Methodology | ||||
Place of Publication: | Coventry | ||||
Official Date: | 2008 | ||||
Dates: |
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Volume: | Vol.2008 | ||||
Number: | No.19 | ||||
Number of Pages: | 31 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Date of first compliant deposit: | 1 August 2016 | ||||
Date of first compliant Open Access: | 1 August 2016 | ||||
Funder: | Engineering and Physical Sciences Research Council (EPSRC) | ||||
Realised As: | Casella, B. and Roberts, G. (2011). Exact simulation of jump-diffusion processes with Monte Carlo applications. Methodology and Computing in Applied Probability, 13(3), pp. 449-473. | ||||
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