Taylor approximation of stochastic functional differential equations with the Poisson jump
© Wang et al.; licensee Springer 2013
Received: 14 May 2013
Accepted: 23 July 2013
Published: 6 August 2013
In the present paper, we are concerned with a class of stochastic functional differential delay equations with the Poisson jump, whose coefficients are general Taylor expansions of the coefficients of the initial equation. Taylor approximations are a useful tool to approximate analytically or numerically the coefficients of stochastic differential equations. The aim of this paper is to investigate the rate of approximation between the true solution and the numerical solution in the sense of the -norm when the drift and diffusion coefficients are Taylor approximations.
Stochastic differential equations [1–3] have attracted a lot of attention, because the problems are not only academically challenging, but also of a practical importance and have played an important role in many fields such as in option pricing, forecast of the growth of population, etc. (see, e.g., ). Recently, much work has been done on stochastic differential equations. Here, we highlight Mao et al.’s great contribution (see [3–9] and references therein). Svishchuk and Kazmerchuk  studied the exponential stability of solutions of linear stochastic differential equations with Poisson jump [11–13] and Markovian switching [4, 12, 14].
In many applications, one assumes that the system under consideration is governed by a principle of causality, that is, the future states of the system are independent of the past states and are determined solely by the present. However, under closer scrutiny, it becomes apparent that the principle of causality is often only the first approximation to the true situation, and that a more realistic model would include some of the past states of the system. Stochastic functional differential equations  give a mathematical explanation for such a system.
Unfortunately, in general, it is impossible to find the explicit solution for stochastic functional differential equations with the Poisson jump. Even when such a solution can be found, it may be only in an implicit form or too complicated to visualize and evaluate numerically. Therefore, many approximate schemes were presented, for example, EM scheme, time discrete approximations, stochastic Taylor expansions , and so on.
The rate of the -closeness between the approximate solution and the solution of the initial equation increases when the number of degrees in Taylor approximations of coefficients increases. Although the Poisson jump is concerned, the rate of approximation to the true solution by the numerical solution is the same as the equation in . Even when the Poisson process is replaced by Poisson random measure, the rate is also the same.
2 Approximate scheme and hypotheses
Throughout this paper, we let be a probability space with a filtration satisfying the usual conditions, i.e., the filtration is continuous on the right and -contains all P-zero sets. Let be an m-dimensional Brownian motion defined on the probability space. For with , denoted by , the family of functions φ from to , that are continuous on the right and limitable on the left. is equipped with the norm , where is the Euclidean norm in , i.e., (). If A is a vector or matrix, its trace norm is denoted by , where its operator norm is denoted by . Denote by the family of all bounded, -measurable, -valued random variable.
with the initial condition , , and is independent of and .
(H3) The functions f, g and h have Taylor expansions in the argument x up to the th, th, and th Fréchet derivatives, respectively .
satisfying the initial condition , , .
Besides the hypotheses motioned above, we will need another one:
Moreover, in what follows, C is a generic positive constant independent of Δ, whose values may vary from line to line.
3 Preparatory lemmas and the main result
Since the proof of the main result is very technical, to begin with, we present several lemmas which will play an important role in the subsequent section.
Similarly, by repeating the procedure above, we see that .
The proof of this lemma is similar to Proposition 2 in .
Then, by Lemmas 1 and 2, we can prove the following main result.
- (1)when ,
- (2)when ,
which completes the proof. □
Remark From the proof, we can easily understand that the convergence speed between the true solution of Eq. (1) and the approximation solution is faster than the Euler-Maruyama method.
The paper is partly supported by the Scientific Research Fund of the Guangxi Hall of Science and Technology No. 201106LX407.
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