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The Euler-Maruyama approximation for the absorption time of the CEV diffusion

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  • The standard convergence analysis of the simulation schemes for the hitting times of diffusions typically requires non-degeneracy of their coefficients on the boundary, which excludes the possibility of absorption. In this paper we consider the CEV diffusion from the mathematical finance and show how a weakly consistent approximation for the absorption time can be constructed, using the Euler-Maruyama scheme.
    Mathematics Subject Classification: Primary: 60H10, 60H35; Secondary: 60F17, 91G60.


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