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July  2012, 17(5): 1455-1471. doi: 10.3934/dcdsb.2012.17.1455

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

 1 Department of Statistics, The Hebrew University, Mount Scopus, Jerusalem 91905, Israel 2 School of Mathematical Sciences, Monash University Vic 3800, Australia

Received  August 2011 Revised  January 2012 Published  March 2012

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.
Citation: Pavel Chigansky, Fima C. Klebaner. The Euler-Maruyama approximation for the absorption time of the CEV diffusion. Discrete & Continuous Dynamical Systems - B, 2012, 17 (5) : 1455-1471. doi: 10.3934/dcdsb.2012.17.1455
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