Strong order-one convergence of the Euler method for random ordinary differential equations driven by semi-martingale noises

Source abstract

It is well known that the Euler method for a random ordinary differential equation d X t /dt = f ( t, X t , Y t ) driven by a stochastic process { Y t } t∈I , on a time interval I , with θ -Hölder sample paths is of strong order θ with respect to the time step, provided f = f ( t, x, y ) is sufficiently regular and with suitable bounds. This order is known to increase to 1 in some special cases. Here, it is proved that, in many more typical cases, further structures on the noise can be exploited so that the strong convergence is of order 1. In fact, we prove so for any semi-martingale noise. This includes Itô diffusion processes, point-process noises, transport-type processes with sample paths of bounded variation, and time-changed Brownian motion. The result follows from estimating the global error as an iterated integral over both large and small mesh scales, and by switching the order of integration to move the critical regularity to the large scale. The work is complemented with numerical simulations showing the optimality of the strong order 1 convergence in those cases, and with an example with fractional Brownian motion noise with Hurst parameter 0 < H < 1/2, which is not a semi-martingale and for which the order of convergence is H + 1/2, hence lower than the attained order 1 in the semi-martingale case, but still higher than the order H of convergence expected from previous works.