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Exact simulation of jump diffusions

Flavio Goncalves, University of Warwick, United Kingdom

In this talk I will present the Exact Algorithm for simulation of diffusions proposed by Beskos, Papaspiliopoulos and Roberts (2006) and its extension for simulation of jump diffusions proposed by Casella and Roberts (2008). The algorithm is exact in the sense that there is no discretisation error. I will show some simulation results where the Exact Algorithm is compared to the Euler Approximation in the simulation of jump diffusions.

References:
Beskos, A; Papaspiliopoulos, O. and Roberts, G. O. (2006). Retrospective exact simulation of diffusion sample paths with applications. Bernoulli, 12(6), 1077-1098.
Casella, B. and Roberts, G. O. (2008). Exact simulation of jump-diffusion processes with Monte Carlo Applications. In preparation.