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    Rate of convergence and asymptotic error distribution of Euler approximation schemes for fractional diffusions

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    Nualart_2016.pdf (591.3Kb)
    Issue Date
    2016-03-22
    Author
    Hu, Yaozhong
    Liu, Yanghui
    Nualart, David
    Publisher
    American Meteorological Society
    Type
    Article
    Article Version
    Scholarly/refereed, publisher version
    Rights
    © Institute of Mathematical Statistics,
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    Abstract
    For a stochastic differential equation(SDE) driven by a fractional Brownian motion(fBm) with Hurst parameter H>12, it is known that the existing (naive) Euler scheme has the rate of convergence n1−2H. Since the limit H→12 of the SDE corresponds to a Stratonovich SDE driven by standard Brownian motion, and the naive Euler scheme is the extension of the classical Euler scheme for Itô SDEs for H=12, the convergence rate of the naive Euler scheme deteriorates for H→12. In this paper we introduce a new (modified Euler) approximation scheme which is closer to the classical Euler scheme for Stratonovich SDEs for H=12, and it has the rate of convergence γ−1n, where γn=n2H−1/2 when H<34, γn=n/logn−−−−√ when H=34 and γn=n if H>34. Furthermore, we study the asymptotic behavior of the fluctuations of the error. More precisely, if {Xt,0≤t≤T} is the solution of a SDE driven by a fBm and if {Xnt,0≤t≤T} is its approximation obtained by the new modified Euler scheme, then we prove that γn(Xn−X) converges stably to the solution of a linear SDE driven by a matrix-valued Brownian motion, when H∈(12,34]. In the case H>34, we show the Lp convergence of n(Xnt−Xt), and the limiting process is identified as the solution of a linear SDE driven by a matrix-valued Rosenblatt process. The rate of weak convergence is also deduced for this scheme. We also apply our approach to the naive Euler scheme.
    URI
    http://hdl.handle.net/1808/25607
    DOI
    https://doi.org/10.1214/15-AAP1114
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    • Mathematics Scholarly Works [283]
    Citation
    Hu, Yaozhong; Liu, Yanghui; Nualart, David. Rate of convergence and asymptotic error distribution of Euler approximation schemes for fractional diffusions. Ann. Appl. Probab. 26 (2016), no. 2, 1147--1207. doi:10.1214/15-AAP1114. https://projecteuclid.org/euclid.aoap/1458651830

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    Lawrence, KS 66045
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    Contact KU ScholarWorks
    785-864-8983
    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    785-864-8983

    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    Image Credits
     

     

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