A statistical interpolation method: linear prediction in a stock price process

U Jin Choi

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J. Korean Math. Soc. 2001; 38(3): 657-667

Printed May 1, 2001

A statistical interpolation method: linear prediction in a stock price process

U Jin Choi

KAIST

Abstract

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Abstract

We propose a statistical interpolation approximate solution for a nonlinear stochastic integral equation of a stock price process. The proposed method has the order $O(h^2)$ of local error under the weaker conditions of $\mu$ and $\sigma$ than those of Milstein's scheme.

Keywords: Stochastic integral equation, Brownian motion, statistical divided difference, statistical interpolation

MSC numbers: 65C30, 65C99, 65L20