An explicit and positivity preserving numerical scheme for the mean reverting CEV model

TL;DR

This paper introduces an explicit numerical scheme for the mean reverting CEV model that guarantees positivity and converges in mean square with a specific order, improving simulation reliability.

Contribution

The paper presents a novel explicit positivity-preserving scheme for the mean reverting CEV model with proven mean square convergence order.

Findings

Scheme guarantees positivity of the solution

Achieves mean square convergence order of a(a-1/2)

Enhances numerical stability and accuracy for the model

Abstract

In this paper we propose an explicit and positivity preserving scheme for the mean reverting CEV model which converges in the mean square sense with convergence order $a(a-1/2)$.