A New Discretization Scheme for One Dimensional Stochastic Differential Equations Using Time Change Method

06/04/2020

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by   Masaaki Fukasawa, et al.

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We propose a new numerical method for one dimensional stochastic differential equations (SDEs). The main idea of this method is based on a representation of a weak solution of a SDE with a time changed Brownian motion, dated back to Doeblin (1940). In cases where the diffusion coefficient is bounded and β-Hölder continuous with 0 < β≤ 1, we provide the rate of strong convergence. An advantage of our approach is that we approximate the weak solution, which enables us to treat a SDE with no strong solution. Our scheme is the first to achieve the strong convergence for the case 0 < β < 1/2.