Weak convergence analysis of the symmetrized Euler scheme for one dimensional SDEs with diffusion coefficient |x|a, a in [1/2,1)
Abstract
In this paper, we are interested in the time discrete approximation of Ef(X(T)) when X is the solution of a stochastic differential equation with a diffusion coefficient function of the form |x|a. We propose a symmetrized version of the Euler scheme, applied to X. The symmetrized version is very easy to simulate on a computer. For smooth functions f, we prove the Feynman Kac representation u(t,x) = Et,x f(X(T)), for u(t,x) solving the associated Kolmogorov PDE and we obtain the upper-bounds on the spatial derivatives of u up to the order four. Then we show that the weak error of our symmetrized scheme is of order one, as for the classical Euler scheme.
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