Finite Difference Methods for the generator of 1D asymmetric alpha-stable Lévy motions
Provides numerical schemes for simulating asymmetric Lévy processes, which are important in finance and physics, but the contribution is incremental.
The paper proposes finite difference methods for the generator of 1D asymmetric α-stable Lévy motions, using discrete convolutions to approximate the spectral multiplier. The methods are evaluated for accuracy and practical use in computing mean exit times.
Several finite difference methods are proposed for the infinitesimal generator of 1D asymmetric $α$-stable Lévy motions, based on the fact that the operator becomes a multiplier in the spectral space. These methods take the general form of a discrete convolution, and the coefficients (or the weights) in the convolution are chosen to approximate the exact multiplier after appropriate transform. The accuracy and the associated advantages/disadvantages are also discussed, providing some guidance on the choice of the right scheme for practical problems, like in the calculation of mean exit time for random processes governed by general asymmetric $α$-stable motions.