Implicit Milstein method for stochastic differential equations via the Wong-Zakai approximation

Abstract

The aim of this paper is to derive a numerical scheme for solving stochastic differential equations (SDEs) via Wong-Zakai approximation. One of the most important methods for solving SDEs is Milstein method, but this method is not so popular because the cost of simulating the double stochastic integrals is high. For overcoming this complexity, we present an implicit Milstein scheme based on Wong-Zakai approximation by approximating the Brownian motion with its truncated Haar expansion. The main advantages of this method lie in the fact that it preserves the convergence order and also stability region of the Milstein method while its simulation is much easier than Milstein scheme. We show the convergence rate of the method by some numerical examples.