Exact Simulation of Multidimensional Reflected Brownian Motion
Probability
2017-08-31 v3 Computation
Abstract
We present the first exact simulation method for multidimensional reflected Brownian motion (RBM). Exact simulation in this setting is challenging because of the presence of correlated local-time-like terms in the definition of RBM. We apply recently developed so-called strong simulation techniques (also known as Tolerance-Enforced Simulation) which allow us to provide a piece-wise linear approximation to RBM with (deterministic) error in uniform norm. A novel conditional acceptance/rejection step is then used to eliminate the error. In particular, we condition on a suitably designed information structure so that a feasible proposal distribution can be applied.
Cite
@article{arxiv.1405.6469,
title = {Exact Simulation of Multidimensional Reflected Brownian Motion},
author = {Jose Blanchet and Karthyek R. A. Murthy},
journal= {arXiv preprint arXiv:1405.6469},
year = {2017}
}