Simulating systems of Itô SDEs with split-step (α,β)-Milstein scheme

Abstract

In the present study, we provide a new approximation scheme for solving stochastic differential equations based on the explicit Milstein scheme. Under sufficient conditions, we prove that the split-step (α,β)-Milstein scheme strongly convergence to the exact solution with order 1.0 in mean-square sense. The mean-square stability of our scheme for a linear stochastic differential equation with single and multiplicative commutative noise terms is studied. Stability analysis shows that the mean-square stability of our proposed scheme contains the mean-square stability region of the linear scalar test equation for suitable values of parameters α,β. Finally, numerical examples illustrate the effectiveness of the theoretical results.

Keywords

• itô stochastic ordinary differential equations
• mean-square convergence
• mean-square stability
• split-step milstein scheme