Approximation of Invariant Measures for Regime-Switching Diffusions

Jianhai Bao; Jinghai Shao; Chenggui Yuan

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arXiv · 1409.6445

Approximation of Invariant Measures for Regime-Switching Diffusions

Jianhai Bao·Jinghai Shao·Chenggui Yuan

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Abstract

In this paper, we are concerned with long-time behavior of Euler-Maruyama schemes associated with a range of regime-switching diffusion processes. The key contributions of this paper lie in that existence and uniqueness of numerical invariant measures are addressed (i) for regime-switching diffusion processes with finite state spaces by the Perron-Frobenius theorem if the "averaging condition" holds, and, for the case of reversible Markov chain, via the principal eigenvalue approach provided that the principal eigenvalue is positive; (ii) for regime-switching diffusion processes with countable state spaces by means of a finite partition method and an M-Matrix theory. We also reveal that numerical invariant measures converge in the Wasserstein metric to the underlying ones. Several examples are constructed to demonstrate our theory.

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Jianhai Bao, Jinghai Shao, Chenggui Yuan. 2014-09-23. Approximation of Invariant Measures for Regime-Switching Diffusions. https://arxiv.org/abs/1409.6445

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