This thesis explains the theoretical background of stochastic differential equations in one dimension. We also show how to solve such differential equations using strong It o-Taylor expansion schemes over large time grids. We also attempt to solve a problem regarding a specific approximation of a stochastic integral for which there is no explicit solution. This approximation, which utilizes the distribution of this particular stochastic integral, gives the wrong order of convergence when performing a grid convergence study. We use numerical integration of the stochastic integral as an alternative approximation, which is correct with regards to convergence.
Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:umu-86799 |
Date | January 2014 |
Creators | Liljas, Erik |
Publisher | Umeå universitet, Institutionen för matematik och matematisk statistik |
Source Sets | DiVA Archive at Upsalla University |
Language | English |
Detected Language | English |
Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
Format | application/pdf |
Rights | info:eu-repo/semantics/openAccess |
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