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Convergence of numerical solutions for a class of stochastic age-dependent capital system with Markovian switching

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  • Qi-min, Zhang

Abstract

Recently, numerical solutions of stochastic differential equations have received a great deal of attention. Numerical approximation schemes are invaluable tools for exploring its properties. In this paper, we introduce a class of stochastic age-dependent (vintage) capital system with Markovian switching, and investigate the convergence of numerical approximation. It is proved that the numerical approximation solutions converge to the analytic solutions of the equations under the given conditions. A numerical example is provided to illustrate the theoretical results.

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  • Qi-min, Zhang, 2011. "Convergence of numerical solutions for a class of stochastic age-dependent capital system with Markovian switching," Economic Modelling, Elsevier, vol. 28(3), pages 1195-1201, May.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1195-1201
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    1. Feichtinger, Gustav & Hartl, Richard F. & Kort, Peter M. & Veliov, Vladimir M., 2006. "Capital accumulation under technological progress and learning: A vintage capital approach," European Journal of Operational Research, Elsevier, vol. 172(1), pages 293-310, July.
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    5. Robert Elliott & Tak Kuen Siu & Leunglung Chan, 2007. "Pricing Volatility Swaps Under Heston's Stochastic Volatility Model with Regime Switching," Applied Mathematical Finance, Taylor & Francis Journals, vol. 14(1), pages 41-62.
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