Euler-Maruyama Approximation for Mean-Reverting Regime Switching CEV Process

DOI

10.2991/amsm-16.2016.21How to use a DOI?

Keywords

CEV process; mean-reverting; regime switching; Euler-Maruyama; Lipschitz condition

Abstract

The mean-reverting constant elasticity of variance (CEV) process with regime switching is one of the most successful continuous-time models of the short term rate, volatility, and other financial quantities. However, most SDEs with Markovian switching do not have explicit solutions. This paper obtains the Euler-Maruyama approximate solution for mean-reverting Regime Switching CEV processes and provides a detailed proof of the convergence of the EM approximate solution to the exact solution.

Copyright

© 2016, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Download article (PDF)

TY  - CONF
AU  - Ruxing Xu
AU  - Dan Wu
PY  - 2016/05
DA  - 2016/05
TI  - Euler-Maruyama Approximation for Mean-Reverting Regime Switching CEV Process
BT  - Proceedings of the 2016 International Conference on Applied Mathematics, Simulation and Modelling
PB  - Atlantis Press
SP  - 88
EP  - 92
SN  - 2352-538X
UR  - https://doi.org/10.2991/amsm-16.2016.21
DO  - 10.2991/amsm-16.2016.21
ID  - Xu2016/05
ER  -