Uniform approximation of the CIR process via exact simulation at random times

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Date
2015
Volume
2113
Issue
Journal
Series Titel
WIAS Preprints
Book Title
Publisher
Berlin : Weierstraß-Institut für Angewandte Analysis und Stochastik
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Abstract

In this paper we uniformly approximate the trajectories of the Cox-Ingersoll-Ross (CIR) process. At a sequence of random times the approximate trajectories will be even exact. In between, the approximation will be uniformly close to the exact trajectory. From a conceptual point of view the proposed method gives a better quality of approximation in a path-wise sense than standard, or even exact simulation of the CIR dynamics at some deterministic time grid.

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