A second-order discretization scheme for the CIR process: application to the Heston model

Alfonsi Aurélien (1)

1 Institut für Mathematik [Berlin]

This paper presents a weak second-order scheme for the Cox-Ingersoll-Ross process, without any restriction on its parameters. At the same time, it presents a general recursive construction method to get weak second-order schemes, extending the ideas of Ninomiya and Victoir. Combining these both results, this allows to propose a rather accurate scheme for the Heston model. Simulation results are given to illustrate this.

Mots clés: simulation; discretization scheme; squared Bessel process; Cox-Ingersoll-Ross model; Heston model

Domaines: Probabilités [math.PR]

Alfonsi Aurélien. A second-order discretization scheme for the CIR process: application to the Heston model. 2007. ⟨hal-00143723v3⟩