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arXiv · 1108.0307

The Euler-Maruyama approximation for the absorption time of the CEV diffusion

Pavel Chigansky·Fima C. Klebaner
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Abstract

A standard convergence analysis of the simulation schemes for the hitting times of diffusions typically requires non-degeneracy of their coefficients on the boundary, which excludes the possibility of absorption. In this paper we consider the CEV diffusion from the mathematical finance and show how a weakly consistent approximation for the absorption time can be constructed, using the Euler-Maruyama scheme.

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Pavel Chigansky, Fima C. Klebaner. 2011-08-01. The Euler-Maruyama approximation for the absorption time of the CEV diffusion. https://doi.org/10.3934/dcdsb.2012.17.1455

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