Discretization error of Stochastic Integrals
Probability
2010-04-14 v1 Computational Finance
Abstract
Asymptotic error distribution for approximation of a stochastic integral with respect to continuous semimartingale by Riemann sum with general stochastic partition is studied. Effective discretization schemes of which asymptotic conditional mean-squared error attains a lower bound are constructed. Two applications are given; efficient delta hedging strategies with transaction costs and effective discretization schemes for the Euler-Maruyama approximation are constructed.
Cite
@article{arxiv.1004.2107,
title = {Discretization error of Stochastic Integrals},
author = {Masaaki Fukasawa},
journal= {arXiv preprint arXiv:1004.2107},
year = {2010}
}