Rate of convergence and asymptotic error distribution of Euler approximation schemes for fractional diffusions

Abstract

For a stochastic differential equation(SDE) driven by a fractional Brownian motion(fBm) with Hurst parameter $H>\frac{1}{2}$, it is known that the existing (naive) Euler scheme has the rate of convergence $n^{1-2H}$. Since the limit $H\to \frac{1}{2}$ of the SDE corresponds to a Stratonovich SDE driven by standard Brownian motion, and the naive Euler scheme is the extension of the classical Euler scheme for Itô SDEs for $H=\frac{1}{2}$, the convergence rate of the naive Euler scheme deteriorates for $H\to \frac{1}{2}$. In this paper we introduce a new (modified Euler) approximation scheme which is closer to the classical Euler scheme for Stratonovich SDEs for $H=\frac{1}{2}$, and it has the rate of convergence ${\gamma }_n^{-1}$, where ${\gamma }_n=n^{2H-1/2}$ when $H<\frac{3}{4}$, ${\gamma }_n=n/\sqrt{\log n}$ when $H=\frac{3}{4}$ and ${\gamma }_n=n$ if $H>\frac{3}{4}$. Furthermore, we study the asymptotic behavior of the fluctuations of the error. More precisely, if $\{X_t,0\le t\le T\}$ is the solution of a SDE driven by a fBm and if $\{X_t^n,0\le t\le T\}$ is its approximation obtained by the new modified Euler scheme, then we prove that ${\gamma }_n(X^n-X)$ converges stably to the solution of a linear SDE driven by a matrix-valued Brownian motion, when $H\in (\frac{1}{2},\frac{3}{4}]$. In the case $H>\frac{3}{4}$, we show the $L^p$ convergence of $n(X_t^n-X_t)$, and the limiting process is identified as the solution of a linear SDE driven by a matrix-valued Rosenblatt process. The rate of weak convergence is also deduced for this scheme. We also apply our approach to the naive Euler scheme.

Published at http://dx.doi.org/10.1214/15-AAP1114 in the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)

References in corpus (2)

• Central limit theorems for sequences of multiple stochastic integrals
• Analysis of the Rosenblatt process

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