Simulations and models of stochastic differential equations

A.C. Guidoum and K. Boukhetala

2017-03-25

snssde1d()

Assume that we want to describe the following SDE:

Ito form1:

\[\begin{equation}\label{eq:05} dX_{t} = \frac{1}{2}\theta^{2} X_{t} dt + \theta X_{t} dW_{t},\qquad X_{0}=x_{0} > 0 \end{equation}\] Stratonovich form: \[\begin{equation}\label{eq:06} dX_{t} = \frac{1}{2}\theta^{2} X_{t} dt +\theta X_{t} \circ dW_{t},\qquad X_{0}=x_{0} > 0 \end{equation}\]

In the above \(f(t,x)=\frac{1}{2}\theta^{2} x\) and \(g(t,x)= \theta x\) (\(\theta > 0\)), \(W_{t}\) is a standard Wiener process. To simulate this models using snssde1d() function we need to specify:

theta = 0.5
f <- expression( (0.5*theta^2*x) )
g <- expression( theta*x )
mod1 <- snssde1d(drift=f,diffusion=g,x0=10,M=500,type="ito") # Using Ito
mod2 <- snssde1d(drift=f,diffusion=g,x0=10,M=500,type="str") # Using Stratonovich 
mod1
## Ito Sde 1D:
##  | dX(t) = (0.5 * theta^2 * X(t)) * dt + theta * X(t) * dW(t)
## Method:
##  | Euler scheme of order 0.5
## Summary:
##  | Size of process   | N  = 1001.
##  | Number of simulation  | M  = 500.
##  | Initial value     | x0 = 10.
##  | Time of process   | t in [0,1].
##  | Discretization    | Dt = 0.001.
mod2
## Stratonovich Sde 1D:
##  | dX(t) = (0.5 * theta^2 * X(t)) * dt + theta * X(t) o dW(t)
## Method:
##  | Euler scheme of order 0.5
## Summary:
##  | Size of process   | N  = 1001.
##  | Number of simulation  | M  = 500.
##  | Initial value     | x0 = 10.
##  | Time of process   | t in [0,1].
##  | Discretization    | Dt = 0.001.

Using Monte-Carlo simulations, the following statistical measures (S3 method) for class snssde1d() can be approximated for the \(X_{t}\) process at any time \(t\):

The summary of the results of mod1 and mod2 at time \(t=1\) of class snssde1d() is given by:

summary(mod1, at = 1)
## 
##  Monte-Carlo Statistics for X(t) at time t = 1
##                                
## Mean                   11.04319
## Variance               34.51348
## Median                  9.67614
## First quartile          6.88003
## Third quartile         13.35324
## Skewness                1.41619
## Kurtosis                5.60120
## Moment of order 3     287.14814
## Moment of order 4    6672.03563
## Moment of order 5  125490.75202
## Int.conf Inf (95%)      3.62732
## Int.conf Sup (95%)     25.94828
summary(mod2, at = 1)
## 
##  Monte-Carlo Statistics for X(t) at time t = 1
##                                
## Mean                    9.61779
## Variance               28.14247
## Median                  8.48501
## First quartile          6.11644
## Third quartile         12.16451
## Skewness                2.61720
## Kurtosis               19.52529
## Moment of order 3     390.73323
## Moment of order 4   15464.00809
## Moment of order 5  668137.79437
## Int.conf Inf (95%)      2.98779
## Int.conf Sup (95%)     20.63778

Hence we can just make use of the rsde1d() function to build our random number generator for the conditional density of the \(X_{t}|X_{0}\) (\(X_{t}^{\text{mod1}}| X_{0}\) and \(X_{t}^{\text{mod2}}|X_{0}\)) at time \(t = 1\).

x1 <- rsde1d(object = mod1, at = 1)  # X(t=1) | X(0)=x0 (Itô SDE)
x2 <- rsde1d(object = mod2, at = 1)  # X(t=1) | X(0)=x0 (Stratonovich SDE)
summary(data.frame(x1,x2))
##        x1               x2        
##  Min.   : 2.204   Min.   : 1.500  
##  1st Qu.: 6.880   1st Qu.: 6.116  
##  Median : 9.676   Median : 8.485  
##  Mean   :11.043   Mean   : 9.618  
##  3rd Qu.:13.353   3rd Qu.:12.165  
##  Max.   :38.898   Max.   :59.373

The function dsde1d() can be used to show the kernel density estimation for \(X_{t}|X_{0}\) at time \(t=1\) with log-normal curves:

mu1 = log(10); sigma1= sqrt(theta^2)  # log mean and log variance for mod1 
mu2 = log(10)-0.5*theta^2 ; sigma2 = sqrt(theta^2) # log mean and log variance for mod2
AppdensI <- dsde1d(mod1, at = 1)
AppdensS <- dsde1d(mod2, at = 1)
plot(AppdensI , dens = function(x) dlnorm(x,meanlog=mu1,sdlog = sigma1))
plot(AppdensS , dens = function(x) dlnorm(x,meanlog=mu2,sdlog = sigma2))

In Figure 2, we present the flow of trajectories, the mean path (red lines) of solution of and , with their empirical \(95\%\) confidence bands, that is to say from the \(2.5th\) to the \(97.5th\) percentile for each observation at time \(t\) (blue lines):

plot(mod1,plot.type="single",ylab=expression(X^mod1))
lines(time(mod1),mean(mod1),col=2,lwd=2)
lines(time(mod1),bconfint(mod1,level=0.95)[,1],col=4,lwd=2)
lines(time(mod1),bconfint(mod1,level=0.95)[,2],col=4,lwd=2)
legend("topleft",c("mean path",paste("bound of",95,"% confidence")),col=c(2,4),lwd=2,cex=0.8)
plot(mod2,plot.type="single",ylab=expression(X^mod2))
lines(time(mod2),mean(mod2),col=2,lwd=2)
lines(time(mod2),bconfint(mod2,level=0.95)[,1],col=4,lwd=2)
lines(time(mod2),bconfint(mod2,level=0.95)[,2],col=4,lwd=2)
legend("topleft",c("mean path",paste("bound of",95,"% confidence")),col=c(2,4),lwd=2,cex=0.8)

Return to snssde1d()

snssde2d()

The following \(2\)-dimensional SDE’s with a vector of drift and a diagonal matrix of diffusion coefficients:

Ito form: \[\begin{equation}\label{eq:09} \begin{cases} dX_t = f_{x}(t,X_{t},Y_{t}) dt + g_{x}(t,X_{t},Y_{t}) dW_{1,t}\\ dY_t = f_{y}(t,X_{t},Y_{t}) dt + g_{y}(t,X_{t},Y_{t}) dW_{2,t} \end{cases} \end{equation}\] Stratonovich form: \[\begin{equation}\label{eq:10} \begin{cases} dX_t = f_{x}(t,X_{t},Y_{t}) dt + g_{x}(t,X_{t},Y_{t}) \circ dW_{1,t}\\ dY_t = f_{y}(t,X_{t},Y_{t}) dt + g_{y}(t,X_{t},Y_{t}) \circ dW_{2,t} \end{cases} \end{equation}\]

\(W_{1,t}\) and \(W_{2,t}\) is a two independent standard Wiener process. To simulate \(2d\) models using snssde2d() function we need to specify:

Ornstein-Uhlenbeck process and its integral

The Ornstein-Uhlenbeck (OU) process has a long history in physics. Introduced in essence by Langevin in his famous 1908 paper on Brownian motion, the process received a more thorough mathematical examination several decades later by Uhlenbeck and Ornstein (1930). The OU process is understood here to be the univariate continuous Markov process \(X_t\). In mathematical terms, the equation is written as an Ito equation: \[\begin{equation}\label{eq016} dX_t = -\frac{1}{\mu} X_t dt + \sqrt{\sigma} dW_t,\quad X_{0}=x_{0} \end{equation}\] In these equations, \(\mu\) and \(\sigma\) are positive constants called, respectively, the relaxation time and the diffusion constant. The time integral of the OU process \(X_t\) (or indeed of any process \(X_t\)) is defined to be the process \(Y_t\) that satisfies: \[\begin{equation}\label{eq017} Y_{t} = Y_{0}+\int X_{t} dt \Leftrightarrow dY_t = X_{t} dt ,\quad Y_{0}=y_{0} \end{equation}\] \(Y_t\) is not itself a Markov process; however, \(X_t\) and \(Y_t\) together comprise a bivariate continuous Markov process. We wish to find the solutions \(X_t\) and \(Y_t\) to the coupled time-evolution equations: \[\begin{equation}\label{eq018} \begin{cases} dX_t = -\frac{1}{\mu} X_t dt + \sqrt{\sigma} dW_t\\ dY_t = X_{t} dt \end{cases} \end{equation}\]

We simulate a flow of \(500\) trajectories of \((X_{t},Y_{t})\), with integration step size \(\Delta t = 0.01\), and using second Milstein method.

x=5;y=0
mu=3;sigma=0.5
fx <- expression(-(x/mu),x)  
gx <- expression(sqrt(sigma),0)
mod2d <- snssde2d(drift=fx,diffusion=gx,Dt=0.01,M=500,x0=c(x,y),method="smilstein")
mod2d
## Ito Sde 2D:
##  | dX(t) = -(X(t)/mu) * dt + sqrt(sigma) * dW1(t)
##  | dY(t) = X(t) * dt + 0 * dW2(t)
## Method:
##  | Second Milstein scheme of order 1.5
## Summary:
##  | Size of process   | N  = 1001.
##  | Number of simulation  | M  = 500.
##  | Initial values    | (x0,y0) = (5,0).
##  | Time of process   | t in [0,10].
##  | Discretization    | Dt = 0.01.
summary(mod2d)
## 
##  Monte-Carlo Statistics for (X(t),Y(t)) at time t = 10
##                           X          Y
## Mean                0.16435   14.47619
## Variance            0.82224   24.76162
## Median              0.12762   14.46409
## First quartile     -0.50351   10.83284
## Third quartile      0.76750   17.93925
## Skewness            0.18123    0.02360
## Kurtosis            2.89768    2.58953
## Moment of order 3   0.13512    2.90818
## Moment of order 4   1.95904 1587.73848
## Moment of order 5   0.79038  108.72301
## Int.conf Inf (95%) -1.46128    4.66876
## Int.conf Sup (95%)  2.06418   24.03663

For plotting (back in time) using the command plot, the results of the simulation are shown in Figure 3.

plot(mod2d)

Take note of the well known result, which can be derived from either this equations. That for any \(t > 0\) the OU process \(X_t\) and its integral \(Y_t\) will be the normal distribution with mean and variance given by: \[ \begin{cases} \text{E}(X_{t}) =x_{0} e^{-t/\mu} &\text{and}\quad\text{Var}(X_{t})=\frac{\sigma \mu}{2} \left (1-e^{-2t/\mu}\right )\\ \text{E}(Y_{t}) = y_{0}+x_{0}\mu \left (1-e^{-t/\mu}\right ) &\text{and}\quad\text{Var}(Y_{t})=\sigma\mu^{3}\left (\frac{t}{\mu}-2\left (1-e^{-t/\mu}\right )+\frac{1}{2}\left (1-e^{-2t/\mu}\right )\right ) \end{cases} \]

Hence we can just make use of the rsde2d() function to build our random number for \((X_{t},Y_{t})\) at time \(t = 10\).

out <- rsde2d(object = mod2d, at = 10) 
summary(out)
##        x                 y         
##  Min.   :-2.6374   Min.   : 1.749  
##  1st Qu.:-0.5035   1st Qu.:10.833  
##  Median : 0.1276   Median :14.464  
##  Mean   : 0.1643   Mean   :14.476  
##  3rd Qu.: 0.7675   3rd Qu.:17.939  
##  Max.   : 3.1062   Max.   :27.377

For each SDE type and for each numerical scheme, the density of \(X_t\) and \(Y_t\) at time \(t=10\) are reported using dsde2d() function, see e.g. Figure 4: the marginal density of \(X_t\) and \(Y_t\) at time \(t=10\).

denM <- dsde2d(mod2d,pdf="M",at =10)
denM
## 
##  Marginal density of X(t)|X(0)=x0 at time t = 10
## 
## Data: x (500 obs.);  Bandwidth 'bw' = 0.2355
## 
##        x                  f(x)          
##  Min.   :-3.343802   Min.   :0.0000383  
##  1st Qu.:-1.554705   1st Qu.:0.0059189  
##  Median : 0.234393   Median :0.0645287  
##  Mean   : 0.234393   Mean   :0.1395981  
##  3rd Qu.: 2.023491   3rd Qu.:0.2782026  
##  Max.   : 3.812589   Max.   :0.4003288  
## 
##  Marginal density of Y(t)|Y(0)=y0 at time t = 10
## 
## Data: y (500 obs.);  Bandwidth 'bw' = 1.292
## 
##        y                  f(y)           
##  Min.   :-2.127983   Min.   :0.00000732  
##  1st Qu.: 6.217316   1st Qu.:0.00361625  
##  Median :14.562615   Median :0.02345091  
##  Mean   :14.562615   Mean   :0.02992753  
##  3rd Qu.:22.907915   3rd Qu.:0.05506848  
##  Max.   :31.253214   Max.   :0.07816690
plot(denM, main="Marginal Density")

Created using dsde2d() plotted in (x, y)-space with dim = 2. A contour and image plot of density obtained from a realization of system \((X_{t},Y_{t})\) at time t=10.

denJ <- dsde2d(mod2d,pdf="J",at =10)
denJ
## 
##  Joint density of (X(t),Y(t)|X(0)=x0,Y(0)=y0) at time t = 10
## 
## Data: (x,y) (2 x 500 obs.);
## 
##        x                    y                 f(x,y)          
##  Min.   :-2.6373740   Min.   : 1.748691   Min.   :0.00000000  
##  1st Qu.:-1.2014904   1st Qu.: 8.155653   1st Qu.:0.00030789  
##  Median : 0.2343932   Median :14.562615   Median :0.00267498  
##  Mean   : 0.2343932   Mean   :14.562615   Mean   :0.00660300  
##  3rd Qu.: 1.6702768   3rd Qu.:20.969578   3rd Qu.:0.00991682  
##  Max.   : 3.1061604   Max.   :27.376540   Max.   :0.03481699
plot(denJ,display="contour",main="Bivariate Density")
plot(denJ,display="image",drawpoints=TRUE,col.pt="green",cex=0.25,pch=19,main="Bivariate Density")

A \(3\)D plot of the density obtained with:

plot(denJ,main="Bivariate Density")

Return to snssde2d()

The stochastic Van-der-Pol equation

The Van der Pol (1922) equation is an ordinary differential equation that can be derived from the Rayleigh differential equation by differentiating and setting \(\dot{x}=y\), see Naess and Hegstad (1994); Leung (1995) and for more complex dynamics in Van-der-Pol equation see Jing et al. (2006). It is an equation describing self-sustaining oscillations in which energy is fed into small oscillations and removed from large oscillations. This equation arises in the study of circuits containing vacuum tubes and is given by: \[\begin{equation}\label{eq:12} \ddot{X}-\mu (1-X^{2}) \dot{X} + X = 0 \end{equation}\] where \(x\) is the position coordinate (which is a function of the time \(t\)), and \(\mu\) is a scalar parameter indicating the nonlinearity and the strength of the damping, to simulate the deterministic equation see Grayling (2014) for more details. Consider stochastic perturbations of the Van-der-Pol equation, and random excitation force of such systems by White noise \(\xi_{t}\), with delta-type correlation function \(\text{E}(\xi_{t}\xi_{t+h})=2\sigma \delta (h)\) \[\begin{equation}\label{eq:13} \ddot{X}-\mu (1-X^{2}) \dot{X} + X = \xi_{t}, \end{equation}\] where \(\mu > 0\) . It’s solution cannot be obtained in terms of elementary functions, even in the phase plane. The White noise \(\xi_{t}\) is formally derivative of the Wiener process \(W_{t}\). The representation of a system of two first order equations follows the same idea as in the deterministic case by letting \(\dot{x}=y\), from physical equation we get the above system: \[\begin{equation}\label{eq:14} \begin{cases} \dot{X} = Y \\ \dot{Y} = \mu \left(1-X^{2}\right) Y - X + \xi_{t} \end{cases} \end{equation}\] The system can mathematically explain by a Stratonovitch equations: \[\begin{equation}\label{eq:15} \begin{cases} dX_{t} = Y_{t} dt \\ dY_{t} = \left(\mu (1-X^{2}_{t}) Y_{t} - X_{t}\right) dt + 2 \sigma \circ dW_{2,t} \end{cases} \end{equation}\]

Implemente in R as follows, with integration step size \(\Delta t = 0.01\) and using stochastic Runge-Kutta methods 1-stage.

mu = 4; sigma=0.1
fx <- expression( y ,  (mu*( 1-x^2 )* y - x)) 
gx <- expression( 0 ,2*sigma)
mod2d <- snssde2d(drift=fx,diffusion=gx,N=10000,Dt=0.01,type="str",method="rk1")
mod2d
## Stratonovich Sde 2D:
##  | dX(t) = Y(t) * dt + 0 o dW1(t)
##  | dY(t) = (mu * (1 - X(t)^2) * Y(t) - X(t)) * dt + 2 * sigma o dW2(t)
## Method:
##  | Runge-Kutta method of order 1
## Summary:
##  | Size of process   | N  = 10001.
##  | Number of simulation  | M  = 1.
##  | Initial values    | (x0,y0) = (0,0).
##  | Time of process   | t in [0,100].
##  | Discretization    | Dt = 0.01.
plot2d(mod2d) ## in plane (O,X,Y)
plot(mod2d)   ## back in time

Return to snssde2d()

snssde3d()

The following \(3\)-dimensional SDE’s with a vector of drift and a diagonal matrix of diffusion coefficients:

Ito form: \[\begin{equation}\label{eq17} \begin{cases} dX_t = f_{x}(t,X_{t},Y_{t},Z_{t}) dt + g_{x}(t,X_{t},Y_{t},Z_{t}) dW_{1,t}\\ dY_t = f_{y}(t,X_{t},Y_{t},Z_{t}) dt + g_{y}(t,X_{t},Y_{t},Z_{t}) dW_{2,t}\\ dZ_t = f_{z}(t,X_{t},Y_{t},Z_{t}) dt + g_{z}(t,X_{t},Y_{t},Z_{t}) dW_{3,t} \end{cases} \end{equation}\] Stratonovich form: \[\begin{equation}\label{eq18} \begin{cases} dX_t = f_{x}(t,X_{t},Y_{t},Z_{t}) dt + g_{x}(t,X_{t},Y_{t},Z_{t}) \circ dW_{1,t}\\ dY_t = f_{y}(t,X_{t},Y_{t},Z_{t}) dt + g_{y}(t,X_{t},Y_{t},Z_{t}) \circ dW_{2,t}\\ dZ_t = f_{z}(t,X_{t},Y_{t},Z_{t}) dt + g_{z}(t,X_{t},Y_{t},Z_{t}) \circ dW_{3,t} \end{cases} \end{equation}\]

\(W_{1,t}\), \(W_{2,t}\) and \(W_{3,t}\) is a 3 independent standard Wiener process. To simulate this system using snssde3d() function we need to specify:

Basic example

Assume that we want to describe the following SDE’s (3D) in Ito form: \[\begin{equation}\label{eq0166} \begin{cases} dX_t = 4 (-1-X_{t}) Y_{t} dt + 0.2 dW_{1,t}\\ dY_t = 4 (1-Y_{t}) X_{t} dt + 0.2 dW_{2,t}\\ dZ_t = 4 (1-Z_{t}) Y_{t} dt + 0.2 dW_{3,t} \end{cases} \end{equation}\]

We simulate a flow of 500 trajectories, with integration step size \(\Delta t = 0.001\).

fx <- expression(4*(-1-x)*y , 4*(1-y)*x , 4*(1-z)*y) 
gx <- rep(expression(0.2),3)
mod3d <- snssde3d(x0=c(x=2,y=-2,z=-2),drift=fx,diffusion=gx,N=1000,M=500)
mod3d
## Ito Sde 3D:
##  | dX(t) = 4 * (-1 - X(t)) * Y(t) * dt + 0.2 * dW1(t)
##  | dY(t) = 4 * (1 - Y(t)) * X(t) * dt + 0.2 * dW2(t)
##  | dZ(t) = 4 * (1 - Z(t)) * Y(t) * dt + 0.2 * dW3(t)
## Method:
##  | Euler scheme of order 0.5
## Summary:
##  | Size of process   | N  = 1001.
##  | Number of simulation  | M  = 500.
##  | Initial values    | (x0,y0,z0) = (2,-2,-2).
##  | Time of process   | t in [0,1].
##  | Discretization    | Dt = 0.001.
summary(mod3d)
## 
##   Monte-Carlo Statistics for (X(t),Y(t),Z(t)) at time t = 1
##                           X       Y        Z
## Mean               -0.79248 0.86862  0.79436
## Variance            0.00870 0.09680  0.00967
## Median             -0.79519 0.81592  0.80148
## First quartile     -0.86393 0.63552  0.72762
## Third quartile     -0.73416 1.05511  0.86827
## Skewness            0.33787 0.58001 -0.22169
## Kurtosis            3.19287 2.96294  2.77273
## Moment of order 3   0.00027 0.01747 -0.00021
## Moment of order 4   0.00024 0.02776  0.00026
## Moment of order 5   0.00003 0.01234 -0.00002
## Int.conf Inf (95%) -0.95983 0.38219  0.59257
## Int.conf Sup (95%) -0.59059 1.58563  0.97425
plot(mod3d,union = TRUE)         ## back in time
plot3D(mod3d,display="persp")    ## in space (O,X,Y,Z)

For each SDE type and for each numerical scheme, the marginal density of \(X_t\), \(Y_t\) and \(Z_t\) at time \(t=1\) are reported using dsde3d() function, see e.g. Figure 8.

den <- dsde3d(mod3d,pdf="M",at =1)
den
## 
##  Marginal density for X(t)|X(0)=x0 at time t = 1
## 
## Data: x (500 obs.);  Bandwidth 'bw' = 0.02422
## 
##        x                   f(x)         
##  Min.   :-1.0999820   Min.   :0.000374  
##  1st Qu.:-0.9165744   1st Qu.:0.049528  
##  Median :-0.7331667   Median :0.581942  
##  Mean   :-0.7331667   Mean   :1.361743  
##  3rd Qu.:-0.5497591   3rd Qu.:2.762533  
##  Max.   :-0.3663515   Max.   :4.147440  
## 
##  Marginal density for Y(t)|Y(0)=y0 at time t = 1
## 
## Data: y (500 obs.);  Bandwidth 'bw' = 0.08079
## 
##        y                   f(y)          
##  Min.   :-0.0270619   Min.   :0.0001683  
##  1st Qu.: 0.4918822   1st Qu.:0.0685150  
##  Median : 1.0108264   Median :0.3049756  
##  Mean   : 1.0108264   Mean   :0.4812734  
##  3rd Qu.: 1.5297705   3rd Qu.:0.9105846  
##  Max.   : 2.0487147   Max.   :1.3148288  
## 
##  Marginal density for Z(t)|Z(0)=z0 at time t = 1
## 
## Data: z (500 obs.);  Bandwidth 'bw' = 0.02553
## 
##        z                  f(z)         
##  Min.   :0.4249639   Min.   :0.000355  
##  1st Qu.:0.6016392   1st Qu.:0.135101  
##  Median :0.7783146   Median :0.799373  
##  Mean   :0.7783146   Mean   :1.413634  
##  3rd Qu.:0.9549899   3rd Qu.:2.807504  
##  Max.   :1.1316652   Max.   :3.909531
plot(den, main="Marginal Density") 

For Joint density for \((X_t,Y_t,Z_t)\) (for more details, see package sm or ks.)

denJ <- dsde3d(mod3d,pdf="J")
denJ
plot(denJ,display="persp")
mtext("Contour surface of kernel density estimate")

Return to snssde3d()

Attractive model for 3D diffusion processes

If we assume that \(U_w( x , y , z , t )\), \(V_w( x , y , z , t )\) and \(S_w( x , y , z , t )\) are neglected and the dispersion coefficient \(D( x , y , z )\) is constant. A system becomes (see Boukhetala,1996): \[\begin{eqnarray}\label{eq19} % \nonumber to remove numbering (before each equation) \begin{cases} dX_t = \left(\frac{-K X_{t}}{\sqrt{X^{2}_{t} + Y^{2}_{t} + Z^{2}_{t}}}\right) dt + \sigma dW_{1,t} \nonumber\\ dY_t = \left(\frac{-K Y_{t}}{\sqrt{X^{2}_{t} + Y^{2}_{t} + Z^{2}_{t}}}\right) dt + \sigma dW_{2,t} \\ dZ_t = \left(\frac{-K Z_{t}}{\sqrt{X^{2}_{t} + Y^{2}_{t} + Z^{2}_{t}}}\right) dt + \sigma dW_{3,t} \nonumber \end{cases} \end{eqnarray}\]

with initial conditions \((X_{0},Y_{0},Z_{0})=(1,1,1)\), by specifying the drift and diffusion coefficients of three processes \(X_{t}\), \(Y_{t}\) and \(Z_{t}\) as R expressions which depends on the three state variables (x,y,z) and time variable t, with integration step size Dt=0.0001.

K = 4; s = 1; sigma = 0.2
fx <- expression( (-K*x/sqrt(x^2+y^2+z^2)) , (-K*y/sqrt(x^2+y^2+z^2)) , (-K*z/sqrt(x^2+y^2+z^2)) ) 
gx <- rep(expression(sigma),3)
mod3d <- snssde3d(drift=fx,diffusion=gx,N=10000,x0=c(x=1,y=1,z=1))
mod3d
## Ito Sde 3D:
##  | dX(t) = (-K * X(t)/sqrt(X(t)^2 + Y(t)^2 + Z(t)^2)) * dt + sigma * dW1(t)
##  | dY(t) = (-K * Y(t)/sqrt(X(t)^2 + Y(t)^2 + Z(t)^2)) * dt + sigma * dW2(t)
##  | dZ(t) = (-K * Z(t)/sqrt(X(t)^2 + Y(t)^2 + Z(t)^2)) * dt + sigma * dW3(t)
## Method:
##  | Euler scheme of order 0.5
## Summary:
##  | Size of process   | N  = 10001.
##  | Number of simulation  | M  = 1.
##  | Initial values    | (x0,y0,z0) = (1,1,1).
##  | Time of process   | t in [0,1].
##  | Discretization    | Dt = 1e-04.

The results of simulation are shown:

plot3D(mod3d,display="persp",col="blue")

Return to snssde3d()

Transformation of an SDE one-dimensional

Next is an example of one-dimensional SDE driven by three independent Brownian motions (\(W_{1,t}\),\(W_{2,t}\),\(W_{3,t}\)), as follows: \[\begin{equation}\label{eq20} dX_{t} = \mu W_{1,t} dt + \sigma W_{2,t} dW_{3,t} \end{equation}\] To simulate the solution of the process \(X_t\), we make a transformation to a system of three equations as follows: \[\begin{eqnarray}\label{eq21} \begin{cases} % \nonumber to remove numbering (before each equation) dX_t = \mu Y_{t} dt + \sigma Z_{t} dW_{3,t} \nonumber\\ dY_t = dW_{1,t} \\ dZ_t = dW_{2,t} \nonumber \end{cases} \end{eqnarray}\]

run by calling the function snssde3d() to produce a simulation of the solution, with \(\mu = 1\) and \(\sigma = 1\).

fx <- expression(y,0,0) 
gx <- expression(z,1,1)
modtra <- snssde3d(drift=fx,diffusion=gx,M=500)
modtra
## Ito Sde 3D:
##  | dX(t) = Y(t) * dt + Z(t) * dW1(t)
##  | dY(t) = 0 * dt + 1 * dW2(t)
##  | dZ(t) = 0 * dt + 1 * dW3(t)
## Method:
##  | Euler scheme of order 0.5
## Summary:
##  | Size of process   | N  = 1001.
##  | Number of simulation  | M  = 500.
##  | Initial values    | (x0,y0,z0) = (0,0,0).
##  | Time of process   | t in [0,1].
##  | Discretization    | Dt = 0.001.
summary(modtra)
## 
##   Monte-Carlo Statistics for (X(t),Y(t),Z(t)) at time t = 1
##                           X        Y        Z
## Mean               -0.00637  0.01584  0.01956
## Variance            0.82162  1.06164  0.98480
## Median              0.03692  0.08289  0.05760
## First quartile     -0.54098 -0.66921 -0.60428
## Third quartile      0.56493  0.67993  0.64193
## Skewness           -0.35442 -0.22477 -0.10933
## Kurtosis            4.02014  3.02166  3.15964
## Moment of order 3  -0.26395 -0.24587 -0.10684
## Moment of order 4   2.71381  3.40564  3.06433
## Moment of order 5  -3.13266 -2.24807 -1.09098
## Int.conf Inf (95%) -1.96767 -2.10310 -2.06506
## Int.conf Sup (95%)  1.72106  1.94134  2.03285

the following code produces the result in Figure 9.

plot(modtra$X,plot.type="single",ylab="X")
lines(time(modtra),mean(modtra)$X,col=2,lwd=2)
lines(time(modtra),bconfint(modtra,level=0.95)$X[,1],col=4,lwd=2)
lines(time(modtra),bconfint(modtra,level=0.95)$X[,2],col=4,lwd=2)
legend("topleft",c("mean path",paste("bound of",95,"% confidence")),col=c(2,4),lwd=2,cex=0.8)

The histogram and kernel density of \(X_t\) at time \(t=1\) are reported using dsde3d() function, see e.g. Figure 10.

den <- dsde3d(modtra,at=1)
den$resx
## NULL
MASS::truehist(den$ech$x,xlab = expression(X[t==1]));box()
lines(den$resx,col="red",lwd=2)
legend("topleft",c("Distribution histogram","Kernel Density"),inset =.01,pch=c(15,NA),lty=c(NA,1),col=c("cyan","red"),lwd=2,cex=0.8)

Return to snssde3d()


  1. The equivalently of \(X_{t}^{\text{mod1}}\) the following Stratonovich SDE: \(dX_{t} = \theta X_{t} \circ dW_{t}\).