Exact simulation for diffusion bridges: An adaptive approach

Abstract

Exact simulation approaches for a class of diffusion bridges have recently been proposed based on rejection sampling techniques. The existing rejection sampling methods may not be practical owing to small acceptance probabilities. In this paper we propose an adaptive approach that improves the existing methods significantly under certain scenarios. The idea of the new method is based on a layered process, which can be simulated from a layered Brownian motion with reweighted layer probabilities. We will show that the new exact simulation method is more efficient than existing methods theoretically and via simulation. © Applied Probability Trust 2014.