Second-order strong convergence for the bounded-domain SPDE discretisation

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Let UT=u(T,⋅)U_T=u(T,\cdot) be the solution of the initial-boundary value problem at time TT for a given Brownian path, and let U^T\widehat{U}_T be its numerical approximation with spatial grid size hh and timestep k∝h2k\propto h^2. The norm ∣⋅∣\\|\cdot\\| is the L2L_2 norm. Strong error conjecture. The error at time TT satisfies

E[∣U^T−UT∣2]=O(h2).\sqrt{\mathbb{E}[\\|\widehat{U}_T-U_T\\|^2]}=O(h^2).

The corresponding result is known for the initial-value problem on R\mathbb{R}; the conjecture asserts that introducing the boundary at x=0x=0 does not affect the weak or strong error, as supported by the numerical experiments. A finite truncation point xmax⁡x_{\max} would add an exponentially decaying truncation error, and reduced regularity near the boundary can increase the error constant while preserving the asymptotic order.

References

Primary source

Michael B. Giles and Christoph Reisinger, “Stochastic finite differences and multilevel Monte Carlo for a class of SPDEs in finance”, arXiv:1204.1442 (2012).

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