Question: For this homework, you are expected to develop several simulation algorithms for a squareroot diffusion {Xt:t0} which satisfies the SDE, dXt=(bXt)dt+XtdWt,t0, with X0=x0. Propose a
For this homework, you are expected to develop several simulation algorithms for a squareroot diffusion {Xt:t0} which satisfies the SDE, dXt=(bXt)dt+XtdWt,t0, with X0=x0. Propose a method based on the Euler scheme to simulate {Xt:t0} and evaluate the accuracy for computing E[XT] with Monte Carlo simulation with/without Richardson extrapolation. Set x0=0.3,=0.8,b=0.3,=1.0 and T=1.0. Plot the error against step size
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