On simulation of tempered stable random variates

Abstract

Various simulation methods for tempered stable random variates with stability index greater than one are investigated with a view towards practical implementation, in particular cases of very small scale parameter, which correspond to increments of a tempered stable Lvy process with a very short stepsize. Methods under consideration are based on acceptancerejection sampling, a Gaussian approximation of a small jump component, and infinite shot noise series representations. Numerical results are presented to discuss advantages, limitations and trade-off issues between approximation error and required computing effort. With a given computing budget, an approximative acceptancerejection sampling technique Baeumer and Meerschaert (2009) [11] is both most efficient and handiest in the case of very small scale parameter and moreover, any desired level of accuracy may be attained with a small amount of additional computing effort. © 2010 Elsevier B.V. All rights reserved.