The Euler-Maruyama approximation for the absorption time of the CEV diffusion

Pavel Chigansky, Fima C Klebaner

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The standard convergence analysis of the simulation schemes for the hitting times of diffusions typically requires non-degeneracy of their coefficients on the boundary, which excludes the possibility of absorption. In this paper we consider the CEV diffusion from the mathematical finance and show how a weakly consistent approximation for the absorption time can be constructed, using the Euler-Maruyama scheme.
Original languageEnglish
Pages (from-to)1455 - 1471
Number of pages17
JournalDiscrete and Continuous Dynamical Systems - Series B
Issue number5
Publication statusPublished - 2012

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