FP6 S I 0

Junji Kaneko
Institute for Social Information Science, FUJITSU LABORATORIES LTD. 140 Miyamoto, Numazu-shi, Shizuoka 410-03, Japan E-mail: jkOiias.flab.fujitsu.co.jp

Rocndlnga ol tho 32nd Confoo on lkclrlon and Control Sln Antonlo, T m r Dscomkc 1993

A Numerical Approximation Method for Stochastic Differential Equations of It6 Type

Abstract
A higher order scheme is developed for the numerical approximation of the solutions to stochastic differential equations

2. Runge-Kutta Method for SDEs

Applying Itbs lemma (It6 1975) to Eq.(l), the 1.5 order I t 6 Taylor expansion of z(t,+l) = x((n 1)h) around x(tn) = ~ ( n h ) is derived as follows: AW:+l - h Z(tn+i) = x(tn) [glnAwn+i [flnh [Gqln

1. Introduction
The problem considered here is to approximate strong solutions of the following stochastic differential equation (SDE) of It6 type :

+ ([Fqln + [Gfln) 7
+

Awn+l h

[G], Aw:+l

- 3Awn+1
6

dx(t) = f(z)dt

+ g ( x ) d ~ ( t )t,

T =IO, T [

,~,

where w(t) is a one-dimensional standard Wiener process, i.e., it satisfies the properties: (i) P ( w(0) = 0 ) = 1, (ii) E{w(t)} = 0, t E [O,m[ and (iii) E w(t)w(s)} = min(t, s) where E{ . } denotes the mean value o ( . ). The functions f and g which map from Rd to Rd are assumed to be enoughly smooth so that Eq.(l) has a unique strong solution, i.e., they satisfy Lipschitz condition and liner growth condition. The stochastic integral implied on the r.h.8. of Eq.(l) is an It6 integral. The approximation considered here is evaluated at points of regular partitions of the interval (0, T]; these have the form (0, h , 2 h , . . . ,N h ) where N is a natural number and h = T / N . F r developing an approxo imation scheme for SDEs, it is useful to introduce the method of discretization, which is analogous to the numerical integration of deterministic differential equations (DDEs), for example, Taylor series method and Runge-Kutta (RI<) method. This will enable us to obtain a stronger kind of convergence and precise information about the error. Thus various kinds of numerical schemes for SDEs have been proposed as Taylor series metliods and RK methods. These include Milshtein (1978, 1985), Riimelii (1982), Talay (1984), Kloeden and Platen (1989) and the references therein. In general, it is difficult to give the higher order derivatives of the coefficient function. By using RI< type schemes, it is possible to avoid the need to evaluate the derivatives of the coefficient function, which is the disadvantage of the Taylor schemes. Thus, in this paper, we present a Runge-Kutta RK) type a p roximation method with higher order accuracy ! r It6 SDE (17. The RI< schemes for SDEs differ from those for o DDEs in that they involve not only the iterative evaluations of drift function f but also those of dispersion function g. Riimelin (1982 has shown that it is necessary to choose the coefficients of R method for SDEs carefully in order that the resulting approximations converge to the solution of the right equations, and that, for one-dimensional equations, the traditional RI< methods for SDEs of It6 type converge only semilinearly in h. Newton (1991) has developed an asymptotically efficient order 1.0 RI< scheme which has explicit form and is organized by %stage evaluations of f and 4-stage evaluations of y. However the order conditions for the scheme in Newton (1991) has not been clarified. Saito and Mitsui (1992) have presented a way to improve the accuracy for 3-stage RK scheme. The explicit scheme developed hy Saito and Mitsui (1992) is a stochastic version of Heuns method and guarantees order 1.5 accuracy. From practical viewpoints, it should be noted that a lot of physical systems are described as stiff systems, for example, chemical plants, large flexible space structures, etc. As is well-known, in the fields of numerical integration of DDEs, implicit Runge-Kutta (IRK) methods have been developed for stiff equations (e.g., Butcher l9S7). Thus, in this paper, we develop a implicit RI< scheme with 1.5 order accuracy for SDE of It6 type (1).

(2) where [ .1, denotes the value of the function ( . ) on t = t, = nh, for example, x, = x ( t n ) and VIn = f(x(tn)). F and G are the differential operators defined by

In Eq.(2), and AWn+l denote the increments of onedimensional Wiener processes which are independent each other and are oktained from the sample values of normal random numbers [?, [ E N ( 0 , ?$, , i.e., AWn+l. = E n f i and A w n t i = [nfi. Since the I t 6 aylor expansion (2) contains bias terms etc., it is impossible to achieve the maximum order of convergence with the methods developed by traditional explicit RK methods (Rumelin 1982) on SDEs. To achieve the higher o r e accuracy the method proposed by Newton (1991) seems promising, where he added the terms in in the evaluations of the It6 coefficients. Moreover, implicit Runge-Kutta (IRK) method is recognized as appropriate for stiff equations which describe the dynamics of various kinds of physical systems, e.g., chemical plants, large flexible space structures, etc. Thus we propose the following RK scheme for SDE (1) :

Zn+1

= In

+ hC biki + AWn+I C 6 i E i + &ZZ&&i

81

a2

82

i=l

i=l

i=l

I(

where itn is the numerical solution such that 5 = %(t,) = %(n!+), , ki and &i are given by

4)

f5bl I bi = bi = 1 and 8, = 0. The RK scheme given by Eqs.(4) and ( 5 ) is organized by the sl-stage evaluations of drift function f and the sz-stage evaluations of dispersion function g. As shown in the evaluation (5a), the scheme has an implicit form.
\ -

with

0191-2216/93/$3.00 Q 1993 IEEE

3602
.. .

3. The 1.5 Order IRK Scheme for It6 SDE

In order to determine the parameters { b;} for i = 1,* . . ,SI, {aij} for i = 1 , . . . , s 1 ( j = l . . . . , i ) , {aij} and { h i j } f o r i = 1,. . . , s l ( j = 1,.. . , i - l), {&;} and { b ; } for z = l , . . .,SZ, {aij}, {a;j} and {&;j} for i = 1,...,.s2 ( j = 1,...,i - 1) in the IRK scheme described by Eqs.(4) and (5) so that the scheme has 1.5 order accuracy, it is desired to make the coefficients of the terms in the 1.5 order Taylor expansion of the IRK scheme coincide with those of the 1.5 order ItaTaylor expansion (2) for SDE (1). Hence the following 18 conditions on the parameters in Eqs.(4) and (5) are derived : (c.1) E;:,&; = 1, (c.2) &;E; = 1/2, (c.3) (c.5) (c.7) (c.8) (c.9) (c.4) E:Al b; = 1, (c.6) Ef,>=l BjEijEj = 1/67 $ El &E;?; = - 1 / ( 4 ~ ) , : E& &;h;j?j+E&l &;a;jZj E::=, &;&;jCj = - 1 / ( 2 ~ ) , 6 ; ~ ;= 1/2, (c.10) biz: = 1/2, : El &;E, = 0, : (c.11) E:& b;q = 1/2, (c.12) E, &E; (c.13) E?. & I. C i.I. E 1 + E:,>=, r,)=l . &;&;jEj +E;,>=, &jE;jCj = 0, (c.14) Ea & I. -&. E -1 + f E:& &,E: = 0, ,=l (c.15) 6; = 0, (c.16) &;ci= 0, (c.17) &;&;j?j 0, = (c.18) &;?: = 0. 1-1 -1 In the conditions (c.1) to (c.18), c; = a ; j , E: = Ej=16a;j, 2 = : & I . c: = a.. 2 - ,=1 a 11. and E; = . a;j. t) Taking into account the conditions (c.1) to (c.18), we set v = 3, s1 = 2 and s2 = 4 in Eq.(4), i.e., the parameters {b;}, {a;j}, and { : } are generated by 2-stage evaluation and &j the parameters {&i},{hi}, {aij}, {aij} and {&j} aregenerated by 4-stage evaluation. By solving the above conditions algebraically, we have the following IRK scheme:

Definition 2 Let z(t) and 2 be the solution to (1 and its , approximation, respectively, then the global error is d e k e d by
sup^ { IIl(tn+~) fn+l n,N

IIz }

The results of analysis of the properties of the scheme (6) are as follows:

Theorem 1. Assume that the following conditions hold:

(A.l) f is Lipschitz continuous with the all derivatives off up to order 3 inclusive polynomial growth (A.2) g is Lipschitz continuous with the all derivatives of g up to order 4 inclusive polynomial growth

E;Ll &;zi = -1/(2v),

z:Ll6;e+

&;< = 1/3,

(A.3) thematrix I - is nonsingular. Then the numerical solution f, given by the scheme (6)is evaluated by

( i)

E { 11 x, - 5,112
and
n.N

I
1) 2,

= z,-~ =

x,-~} o(h4) =

supE {

- 5,))} = o(h2)

z;il

Theorem 2. If the conditions in Theorem 1 hold, then (5,) given by Eq.(6) is a 1.5 order asymptotically efficient ap m x imation in the sense that for any PN-adapted sequence f?,,}, w.p. I ,

z.-

W N ~and )

where PN is the a-field generated by the samples ( w h , W Z h , . ., N . } is a sequence ofnatural number with the property that N;+l)N; is a natural number greater than one for each i.

4. Conclusions
We considered the numerical approximation problem for It6 SDE (1 . The numerical scheme wm developed as an implicit Runge-kutta (IRK) method which is appropriate for treating stiff stochastic equa.tions. The results of a.na.lysisof the properties of the scheme are as follows: Theorem 1 gives the evaluations of local and global errors of the IRK scheme. This theorem guarantees that the IRK scheme is of 1.5 order accuracy. The asymptotic efficiency of the numerical solution is also examined in Theorem 2.

References

Definition 1 Let z(t) and Z be the solution to (1) and its , approximation, respectively, then the local error from t = t, to t = tn+l is defined by , E { Ilz(tn+l) - z,+i I z(tn) = f, = X } , forv-%, E Rd. where )I . 11 is the Euclidean norm for elements of R d .

Butcher, J. c. (1987). The Numerical Analysis of Ordinary Differential Equations : Runge-Kutta and General Linear Method, John Wiley k Sons, Chichester. It6, K. (1975). Stochastic differentials, Applied Math. and Optimization, Vol.1, pp. 347-381. Kloeden, P. E. and E. Platen (1989). -4 survey of numerical methods for stochastic differential eqmtions, J. Stoch. Hydrol. Hydraulics, vol. 3, pp. 155-178. Milshtein, G. N. (1978). &Amethod of second-order accuracy integration of stochastic differential equations, Theory Probab. Appl., Vol. 23, pp. 396-401. Milshtein, G. N. (1985). Weak approximation of solutions of systems of stochastic differential equations, Theovy Probab. Appl., Vo!. 30, pp. 750-766. Newton, N. J. (1991). Asymptotically efficient Runge-Kutta method for a class of It6 and Stratonovich equations,SIAM J. Appl. Math., Vol. 51, pp. 542-567 Riimelin, W. (1982). Numerical treatment of stochastic differential equations, SIAM J. Numer. Anal., Vol. 19, pp. 604-6 13. Saito, Y. and T. Mitsui (1992). Discrete approximation for stochastic differential equations, (in Japanese) Trans. Japan SIAM, Vol. 2, pp. 1-16. Talay, D. (1984). Efficient nunierical schemes for the approximation of expectation of functiona.ls of SDE, in Lecture Notes in Control and Information Sciences, vol. 61, pp. 294-313, Springer-Verlag.

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