A New Modification of the Milstein Method and the Taylor-Ito Expansion for Ito Stochastic Differential Equations with Drift and Diffusion Coefficients Having Non-Differentiable or Singular Time-Dependent Multipliers

Source abstract

The article presents a new modification of the Milstein method for systems of Ito stochastic differential equations with drift and diffusion coefficients having differentiable and non-differentiable or singular power-law time-dependent components (the latter depending only on the time variable). By iteratively applying Ito's formula to the mentioned differentiable components of the drift and diffusion coefficients, a new modification of the Milstein method is derived in the paper. A key feature of this modification of the Milstein method is the presence of time-dependent weight functions in the iterated Ito stochastic integrals of the second and first multiplicity (the specified weight functions are identically equal to unity in the classical Milstein method). To approximate the specified iterated Ito stochastic integrals (with respect to the components of a multidimensional Wiener process) that involve time-dependent weight functions, the paper proposes using the method of generalized multiple Fourier series, introduced by the first author in 2006. The article also provides the Taylor-Ito expansion for Ito SDEs with non-differentiable or singular drift and diffusion coefficients.