Sampling of Stochastic Differential Equations using the Karhunen-Loève Expansion and Matrix Functions

Antti Koskela, Samuel D. Relton

Published 2020-04-12Version 1

We consider linearizations of stochastic differential equations with additive noise using the Karhunen-Lo\`eve expansion. We obtain our linearizations by truncating the expansion and writing the solution as a series of matrix-vector products using the theory of matrix functions. Moreover, we restate the solution as the solution of a system of linear differential equations. We obtain strong and weak error bounds for the truncation procedure and show that, under suitable conditions, the mean square error has order of convergence $\mathcal{O}(\frac{1}{m})$ and the second moment has a weak order of convergence $\mathcal{O}(\frac{1}{m})$, where $m$ denotes the size of the expansion. We also discuss efficient numerical linear algebraic techniques to approximate the series of matrix functions and the linearized system of differential equations. These theoretical results are supported by experiments showing the effectiveness of our algorithms when compared to standard methods such as the Euler-Maruyama scheme.