Probability Seminar

SPEAKER: Mr. Ernest Jum

TITLE: Jump-adapted discretization schemes for Levy driven SDEs, Part 2.

ABSTRACT: An algorithm for weak approximation of stochastic differential equations driven by pure jump Levy processes is presented. The method uses adaptive non-uniform discretization based on the times of large jumps of the driving process. To approximate the solution between these times, the small jump noise is replaced with a Brownian motion. This technique avoids the simulation of the increments of the Levy process and in many cases achieves a better rate of convergence than the traditional Euler scheme with equal time steps.