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Paper No. 08-14

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S Peluchetti and GO Roberts

An empirical study of the efficiency of EA for diffusion simulation

Date: February 2008

Abstract: In this paper we investigate the efficiency of some simulation schemes for the numerical solution of a one dimensional stochastic differential equation (SDE). The schemes considered are: the Exact Algorithm (EA), the Euler, the Predictor-Corrector and the Ozaki-Shoji schemes. The focus of the work is on EA which samples skeletons of SDEs without any approximation. The analysis is carried out via a simulation study using some test SDEs. We also consider efficiency issues arising by the extension of EA to the multi-dimensional setting.