An adaptive Euler-Maruyama scheme for stochastic differential equations with discontinuous drift and its convergence analysis

Andreas Neuenkirch, Michaela Szölgyenyi, Lukasz Szpruch

Published 2018-02-13Version 1

We study the strong approximation of stochastic differential equations with discontinuous drift coefficients and (possibly) degenerate diffusion coefficients. To account for the discontinuity of the drift coefficient we construct an adaptive step sizing strategy for the explicit Euler-Maruyama scheme. As a result, we obtain a numerical method which has -- up to logarithmic terms -- strong convergence order 1/2 with respect to the average computational cost. We support our theoretical findings with several numerical examples.