An adaptive splitting method for the Cox-Ingersoll-Ross process

We propose a new splitting method for strong numerical solution of the Cox-Ingersoll-Ross model. For this method, applied over both deterministic and adaptive random meshes, we prove a uniform moment bound and strong error results of order 1/4 in L₁ and L₂ for the parameter regime κθ>σ². We then extend the new method to cover all parameter values by introducing a soft zero region (where the deterministic flow determines the approximation) giving a hybrid type method to deal with the reflecting boundary. From numerical simulations we observe a rate of order 1 when κθ>σ² rather than 1/4. Asymptotically, for large noise, we observe that the rates of convergence decrease similarly to those of other schemes but that the proposed method making use of adaptive timestepping displays smaller error constants.