Corpus ID: 235790307

Simulation of Multidimensional Diffusions with Sticky Boundaries via Markov Chain Approximation

@inproceedings{Meier2021SimulationOM,
  title={Simulation of Multidimensional Diffusions with Sticky Boundaries via Markov Chain Approximation},
  author={C. Meier and Lingfei Li and Gongqiu Zhang},
  year={2021}
}
We develop a new simulation method for multidimensional diffusions with sticky boundaries. The challenge comes from simulating the sticky boundary behavior, for which standard methods like the Euler scheme fail. We approximate the sticky diffusion process by a multidimensional continuous time Markov chain (CTMC), for which we can simulate easily. We develop two ways of constructing the CTMC: approximating the infinitesimal generator of the sticky diffusion by finite difference using standard… Expand

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