2. We recall that theoretically, one can estimate and in some'cases also practically calculate the error of an approximation using the absolute error criterion; ()=E(XTYT) for a maximum step-size . (a) Distinguish between strong order and weak order of convergence. (4 marks) MFI 8302. Computational Methods in Finance Please turn to the next page MSc Mathematical Finance \& Risk Analytics Page 2 of 2 (b) Consider the Heston model which is described by the bivariate stochastic process for the stock price St and its variance vt. dSt=rStdt+vtStdWt1,dvt=(vvt)dt+vtdWt2, where E[dWt1dWt2]=dt. By first decoupling the system of stochastic differential equations, derive the Milstein scheme for this stochastic volatility model. (6 marks)