Modelling State Variables using SDE and FDM

Modelling State Variables using SDE and FDM

Postby Cuchulainn » Sun Feb 18, 2007 4:28 pm

In the framework we wish to model a wide range of stochastic differential equations (SDE). For example, linear and nonlinear 1-factor and n-factor models.

In general, it is not possible to find an exact solution and then we resort to FDM. But not all FDM schemes can be used with all SDE; for example, Crank Nicolson only works for linear drift and diffusion terms. We wish to reflect this in eh software and for this reason a modified _Visitor_ pattern is a good choice.



The next step is to add Jump diffusion which means that the framework must be _non-intrusively_ extended. Decorator pattern?
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