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Path-wise approximation of the Cox-Ingersoll-Ross process
(Berlin : Weierstraß-Institut für Angewandte Analysis und Stochastik, 2013) Milstein, Grigori N.; Schoenmakers, John G.M.
The Doss-Sussmann (DS) approach is used for simulating the Cox-Ingersoll-Ross (CIR) process. The DS formalism allows for expressing trajectories of the CIR process by solutions of some ordinary differential equation (ODE) that depend on realizations of the Wiener process involved. Via simulating the first-passage times of the increments of the Wiener process to the boundary of an interval and solving an ODE, we approximately construct the trajectories of the CIR process. From a conceptual point of view the proposed method may be considered as an exact simulation approach.
Uniform approximation of the CIR process via exact simulation at random times
(Berlin : Weierstraß-Institut für Angewandte Analysis und Stochastik, 2015) Milstein, Grigori N.; Schoenmakers, John G.M.
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.