Hindawi Publishing Corporation Journal of Applied Mathematics Volume 2012, Article ID 675651, 32 pages doi:10.1155/2012/675651 Research Article Approximations of Numerical Method for Neutral Stochastic Functional Differential Equations with Markovian Switching Hua Yang1 and Feng Jiang2 1 2 School of Mathematics and Computer Science, Wuhan Polytechnic University, Wuhan 430023, China School of Statistics and Mathematics, Zhongnan University of Economics and Law, Wuhan 430073, China Correspondence should be addressed to Feng Jiang, fjiang78@gmail.com Received 9 April 2012; Accepted 17 September 2012 Academic Editor: Zhenyu Huang Copyright q 2012 H. Yang and F. Jiang. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Stochastic systems with Markovian switching have been used in a variety of application areas, including biology, epidemiology, mechanics, economics, and finance. In this paper, we study the Euler-Maruyama EM method for neutral stochastic functional differential equations with Markovian switching. The main aim is to show that the numerical solutions will converge to the true solutions. Moreover, we obtain the convergence order of the approximate solutions. 1. Introduction Stochastic systems with Markovian switching have been successfully used in a variety of application areas, including biology, epidemiology, mechanics, economics, and finance 1. As well as deterministic neutral functional differential equations and stochastic functional differential equations SFDEs, most neutral stochastic functional differential equations with Markovian switching NSFDEsMS cannot be solved explicitly, so numerical methods become one of the powerful techniques. A number of papers have studied the numerical analysis of the deterministic neutral functional differential equations, for example, 2, 3 and references therein. The numerical solutions of SFDEs and stochastic systems with Markovian switching have also been studied extensively by many authors. Here we mention some of them, for example, 4–16. moreover, Many well-known theorems in SFDEs are successfully extended to NSFDEs, for example, 17–24 discussed the stability analysis of the true solutions. However, to the best of our knowledge, little is yet known about the numerical solutions for NSFDEsMS. In this paper we will extend the method developed by 5, 16 to 2 Journal of Applied Mathematics NSFDEsMS and study strong convergence for the Euler-Maruyama approximations under the local Lipschitz condition, the linear growth condition, and contractive mapping. The three conditions are standard for the existence and uniqueness of the true solutions. Although the method of analysis borrows from 5, the existence of the neutral term and Markovian switching essentially complicates the problem. We develop several new techniques to cope with the difficulties which have risen from the two terms. Moreover, we also generalize the results in 19. In Section 2, we describe some preliminaries and define the EM method for NSFDEsMS and state our main result that the approximate solutions strongly converge to the true solutions. The proof of the result is rather technical so we present several lemmas in Section 3 and then complete the proof in Section 4. In Section 5, under the global Lipschitz condition, we reveal the order of the convergence of the approximate solutions. Finally, a conclusion is made in Section 6. 2. Preliminaries and EM Scheme Throughout this paper let Ω, F, P be a complete probability space with a filtration {Ft }t≥0 satisfying the usual conditions, that is, it is right continuous and increasing while F0 contains all P-null sets. Let wt w1 t, . . . , wm tT be an m-dimensional Brownian motion defined on the probability space. Let | · | be the Euclidean norm in Rn . Let R 0, ∞, and let τ > 0. Denoted by C−τ, 0, Rn the family of continuous functions from −τ, 0 to Rn p with the norm ϕ sup−τ≤θ≤0 |ϕθ|. Let p > 0 and LF0 −τ, 0; Rn be the family of F0 n measurable C−τ, 0; R -valued random variables ξ such that Eξp < ∞. If xt is an Rn valued stochastic process on t ∈ −τ, ∞, we let xt {xt θ : −τ ≤ θ ≤ 0} for t ≥ 0. Let rt, t ≥ 0, be a right-continuous Markov chain on the probability space taking values in a finite state space S {1, 2, . . . , N} with the generator Γ γij N×N given by ⎧ ⎨γij Δ oΔ P rt Δ j | rt i ⎩1 γij Δ oΔ if i / j, if i j, 2.1 where Δ > 0. Here γij ≥ 0 is the transition rate from i to j if i / j while γii − i / j γij . We assumethat the Markov chain r· is independent of the Brownian motion w·. It is well known that almost every sample path of r· is a right-continuous step function with finite number of simple jumps in any finite subinterval of 0, ∞. In this paper, we consider the n-dimensional NSFDEsMS dxt − uxt , rt fxt , rtdt gxt , rtdwt, p t ≥ 0, 2.2 with initial data x0 ξ ∈ LF0 −τ, 0; Rn and r0 i0 ∈ S, where f : C−τ, 0; Rn → Rn , g : C−τ, 0; Rn → Rn×m and u : C−τ, 0; Rn → Rn . As a standing hypothesis we assume that both f and g are sufficiently smooth so that 2.2 has a unique solution. We refer the reader to Mao 10, 12 for the conditions on the existence and uniqueness of the solution xt. The initial data ξ and i0 could be random, but the Markov property ensures that it is sufficient to consider only the case when both x0 and i0 are constants. To analyze the Euler-Maruyama EM method, we need the following lemma see 6, 7, 10–12, 16. Journal of Applied Mathematics 3 Lemma 2.1. Given Δ > 0, let rkΔ rkΔ for k ≥ 0. Then {rkΔ , k 0, 1, 2, . . .} is a discrete Markov chain with the one-step transition probability matrix P Δ Pij Δ N×N eΔΓ . 2.3 For the completeness, we give the simulation of the Markov chain as follows. Given a stepsize Δ > 0, we compute the one-step transition probability matrix P Δ Pij Δ N×N eΔΓ . 2.4 Let r0Δ i0 and generate a random number ξ1 which is uniformly distributed in 0, 1. Define r1Δ ⎧ ⎪ ⎪ ⎪i1 , ⎨ if i1 ∈ S − {N} such that N−1 ⎪ ⎪ ⎪ Pi0 ,j Δ ≤ ξ1 , ⎩N, if i 1 −1 i1 j1 j1 Pi0 ,j Δ ≤ ξ1 < Pi0 ,j Δ, 2.5 j1 where we set 0i1 Pi0 ,j Δ 0 as usual. Generate independently a new random number ξ2 which is again uniformly distributed in 0, 1, and then define r2Δ ⎧ ⎪ ⎪ ⎪ ⎨i2 , if i2 ∈ S − {N} such that N−1 ⎪ ⎪ ⎪ Pr1Δ ,j Δ ≤ ξ2 . ⎩N, if i 2 −1 i2 j1 j1 Pr1Δ ,j Δ ≤ ξ2 < Pr1Δ ,j Δ, 2.6 j1 Repeating this procedure a trajectory of {rkΔ , k 0, 1, 2, . . .} can be generated. This procedure can be carried out independently to obtain more trajectories. Now we can define the Euler-Maruyama EM approximate solution for 2.2 on the finite time interval 0, T . Without loss of any generality, we may assume that T/τ is a rational number; otherwise we may replace T by a larger number. Let the step size Δ ∈ 0, 1 be a fraction of τ and T , namely, Δ τ/N T/M for some integers N > τ and M > T . The explicit discrete EM approximate solution ykΔ, k ≥ −N is defined as follows: ykΔ ξkΔ, −N ≤ k ≤ 0, Δ f y kΔ , rkΔ Δ yk 1Δ ykΔ u ykΔ , rkΔ − u y k−1Δ , rk−1 g ykΔ , rkΔ Δwk , 0 ≤ k ≤ M − 1, 2.7 4 Journal of Applied Mathematics where Δwk wk 1Δ − wkΔ and y kΔ {y kΔ θ : −τ ≤ θ ≤ 0} is a C−τ, 0; Rn -valued random variable defined by ykΔ θ yk iΔ θ − iΔ yk i 1Δ − yk iΔ Δ Δ − θ − iΔ θ − iΔ yk iΔ yk i 1Δ, Δ Δ 2.8 for iΔ ≤ θ ≤ i 1Δ, i −N, −N 1, . . . , −1, where in order for y −Δ to be well defined, we set y−N 1Δ ξ−NΔ. That is, ykΔ · is the linear interpolation of yk − NΔ, yk − N 1Δ, . . . , ykΔ. We hence have y θ Δ − θ − iΔ yk iΔ θ − iΔ yk i 1Δ kΔ Δ Δ ≤ yk iΔ ∨ yk i 1Δ. 2.9 We therefore obtain y kΔ θ max yk iΔ, −N≤i≤0 for any k −1, 0, 1, . . . , M − 1. 2.10 It is obvious that y −Δ ≤ y 0 . In our analysis it will be more convenient to use continuous-time approximations. We hence introduce the C−τ, 0; Rn -valued step process yt M−2 ykΔ 1kΔ,k 1Δ t y M−1Δ 1M−1Δ,MΔ t, k0 rt M−1 2.11 rkΔ 1kΔ,k 1Δ t, k0 and we define the continuous EM approximate solution as follows: let yt ξt for −τ ≤ t ≤ 0, while for t ∈ kΔ, k 1Δ, k 0, 1, . . . , M − 1, t − kΔ ykΔ − y k−1Δ , rkΔ − u y −Δ , r0Δ yt ξ0 u y k−1Δ Δ t t f y s , rs ds g y s , rs dws. 0 0 2.12 Journal of Applied Mathematics 5 Clearly, 2.12 can also be written as t − kΔ Δ yt ykΔ u y k−1Δ ykΔ − y k−1Δ , rkΔ − u y k−1Δ , rk−1 Δ t t f ys , rs ds g ys , rs dws. kΔ 2.13 kΔ In particular, this shows that ykΔ ykΔ, that is, the discrete and continuous EM approximate solutions coincide at the grid points. We know that yt is not computable because it requires knowledge of the entire Brownian path, not just its Δ-increments. However, ykΔ ykΔ, so the error bound for yt will automatically imply the error bound for ykΔ. It is then obvious that y ≤ ykΔ , kΔ ∀k 0, 1, 2, . . . , M − 1. 2.14 Moreover, for any t ∈ 0, T , sup yt 0≤t≤T sup y kΔ ≤ 0≤k≤M−1 sup sup ykΔ 0≤k≤M−1 sup ykΔ θ 0≤k≤M−1 −τ≤θ≤0 2.15 ≤ sup sup yt θ 0≤t≤T −τ≤θ≤0 ≤ sup ys, −τ≤s≤T and letting t/Δ be the integer part of t/Δ, then y y t t/ΔΔ ≤ yt/Δ Δ ≤ sup ys . −τ≤s≤t 2.16 These properties will be used frequently in what follows, without further explanation. For the existence and uniqueness of the solution of 2.2 and the boundedness of the solution’s moments, we impose the following hypotheses e.g., see 11. Assumption 2.2. For each integer j ≥ 1 and i ∈ S, there exists a positive constant Cj such that 2 2 2 f ϕ, i − f ψ, i ∨ g ϕ, i − g ψ, i ≤ Cj ϕ − ψ 2.17 for ϕ, ψ ∈ C−τ, 0; Rn with ϕ ∨ ψ ≤ j. Assumption 2.3. There is a constant K > 0 such that 2 2 f ϕ, i ∨ g ϕ, i ≤ K 1 ϕ2 , for ϕ ∈ C−τ, 0; Rn and i ∈ S. 2.18 6 Journal of Applied Mathematics Assumption 2.4. There exists a constant κ ∈ 0, 1 such that for all ϕ, ψ ∈ C−τ, 0; Rn and i ∈ S, u ϕ, i − u ψ, i ≤ κϕ − ψ , 2.19 for ϕ, ψ ∈ C−τ, 0; Rn and u0, i 0. We also impose the following condition on the initial data. p Assumption 2.5. ξ ∈ LF0 −τ, 0; Rn for some p ≥ 2, and there exists a nondecreasing function α· such that E sup |ξt − ξs| 2 −τ≤s≤t≤0 ≤ αt − s, 2.20 with the property αs → 0 as s → 0. From Mao and Yuan 11, we may therefore state the following theorem. Theorem 2.6. Let p ≥ 2. If Assumptions 2.3–2.5 are satisfied, then E sup |xt| p −τ≤t≤T ≤ Hκ,p,T,K,ξ , 2.21 for any T > 0, where Hκ,p,T,K,ξ is a constant dependent on κ, p, T , K, ξ. The primary aim of this paper is to establish the following strong mean square convergence theorem for the EM approximations. Theorem 2.7. If Assumptions 2.2–2.5 hold, lim E Δ→0 2 sup xt − yt 0. 2.22 0≤t≤T The proof of this theorem is very technical, so we present some lemmas in the next section, and then complete the proof in the sequent section. 3. Lemmas Lemma 3.1. If Assumptions 2.3–2.5 hold, for any p ≥ 2, there exists a constant Hp such that E where Hp is independent of Δ. p sup yt −τ≤t≤T ≤H p , 3.1 Journal of Applied Mathematics 7 Proof. For t ∈ kΔ, k 1Δ, k 0, 1, 2, . . . , M − 1, set yt : yt − uyk−1Δ t − kΔykΔ − Δ yk−1Δ /Δ, rk and ht : E p , sup ys p ht : E sup ys . −τ≤s≤t 3.2 0≤s≤t Recall the inequality that for p ≥ 1 and any ε > 0, |x y|p ≤ 1 εp−1 |x|p ε1−p |y|p . Then we have, from Assumption 2.4, ⎛ ⎞p ⎞ − y y − kΔ t p kΔ k−1Δ 1−p ⎜ Δ ⎟ ⎟ ytp ≤ 1 εp−1 ⎜ , rk ⎠ ⎠ ε u⎝yk−1Δ ⎝ yt Δ ⎛ ≤ 1 εp−1 p p t − kΔ . yt ε1−p κp y y − y kΔ k−1Δ k−1Δ Δ 3.3 By y −Δ ≤ y 0 , noting k 0, 1, 2, . . . , M − 1, t − kΔ p k 1Δ − t p t − kΔ y ykΔ − y k−1Δ ≤ ykΔ y k−1Δ k−1Δ Δ Δ Δ p t − kΔ k 1Δ − t sup ys sup ys ≤ Δ Δ −τ≤s≤t −τ≤s≤t p ≤ sup ys . −τ≤s≤t 3.4 Consequently, choose ε κ/1 − κ, then p p ytp ≤ 1 − κ1−p yt . κ sup ys −τ≤s≤t 3.5 Hence, p ht ≤ Eξ E sup ys p 0≤s≤t 3.6 ≤ Eξp κht 1 − κ1−p ht, which implies ht ≤ ht Eξp . 1 − κ 1 − κp 3.7 8 Journal of Applied Mathematics Since yt y0 t 0 f y s , rs ds t 0 g y s , rs dws, 3.8 with y0 y0 − uy−Δ , by the Hölder inequality, we have p t p p p−1 t p p−1 yt f y , rs ds g y , rs dws . y0 ≤3 t s s 0 0 3.9 Hence, for any t1 ∈ 0, T , 1 ≤ 3 ht p−1 p T p−1 E Ey0 t1 0 p t p f y , rs ds E sup g y , rs dws . s s 0≤t≤t1 0 3.10 By Assumption 2.4 and the fact y −Δ ≤ y 0 , we compute that p p Ey0 − u y −Δ , r0Δ Ey0 p ≤ E y0 κy −Δ p ≤ E y0 κy 0 3.11 ≤ E|ξ0| κξp ≤ 1 κp Eξp . Assumption 2.3 and the Hölder inequality give E t1 0 f y , rs p ds ≤ E s t1 0 2 p/2 K p/2 1 y s ds ≤ K p/2 2p−2/2 E ≤K p/2 p−2/2 2 t1 0 p 1 ys ds t1 p T E sup yt ds . 0 −τ≤t≤s 3.12 Journal of Applied Mathematics 9 Applying the Burkholder-Davis-Gundy inequality, the Hölder inequality and Assumption 2.3 yield p t p/2 t 1 2 g y s , rs ds ≤ Cp E E sup g ys , rs dws 0≤t≤t1 0 0 ≤ Cp T p−2/2 E t1 0 ≤ Cp T p−2/2 E t1 0 g y , rs p ds s 2 p/2 K p/2 1 ys ds ≤ Cp T p−2/2 K p/2 2p−2/2 E t1 0 t1 p ds , T E sup yt ≤ Cp T p−2/2 K p 1 ys ds p/2 p−2/2 2 −τ≤t≤s 0 3.13 where Cp is a constant dependent only on p. Substituting 3.11, 3.12, and 3.13 into 3.10 gives 1 ≤ 3p−1 1 κp Eξp K p/2 2p−2/2 T p Cp 2T p−2/2 K p/2 T ht 3 p−1 K p/2 p−2/2 p−1 2 T p−2/2 Cp 2T K p/2 ! t1 E 0 : C1 C2 ! p ds sup yt −τ≤t≤s 3.14 t1 hsds. 0 Hence from 3.7, we have t1 1 Eξp C1 C2 hsds ht1 ≤ 1 − κ 1 − κp 0 C1 C2 Eξp ≤ 1 − κ 1 − κp 1 − κp t1 3.15 hsds. 0 By the Gronwall inequality we find that " hT ≤ # p C1 Eξp eC2 T/1−κ . 1 − κ 1 − κp 3.16 From the expressions of C1 and C2 , we know that they are positive constants dependent only on ξ, κ, K, p, and T , but independent of Δ. The proof is complete. 10 Journal of Applied Mathematics Lemma 3.2. If Assumptions 2.3–2.5 hold, then for any integer l > 1, E 2 sup ykΔ − y k−1Δ ≤ c1 c1 αΔ c1 lΔl−1/l : γΔ, 0≤k≤M−1 3.17 where c1 1/1 − 2κ, c1 8κ/1 − 2κH2, and c1 l is a constant dependent on l but independent of Δ. Proof. For θ ∈ iΔ, i 1Δ, where i −N, −N 1, . . . , −1, from 2.7, i 1Δ − θ yk iΔ − yk − 1 iΔ y kΔ − y k−1Δ ≤ Δ θ − iΔ yk i 1Δ − yk iΔ Δ ≤ yk iΔ − yk − 1 iΔ ∨ yk i 1Δ − yk iΔ, 3.18 so y kΔ − y k−1Δ ≤ sup yk iΔ − yk − 1 iΔ. 3.19 −N≤i≤0 We therefore have E 2 sup ykΔ − yk−1Δ ≤E 0≤k≤M−1 sup −N≤i≤0 0≤k≤M−1 ykΔ − yk − 1Δ2 . ≤E 2 sup yk iΔ − yk − 1 iΔ sup −N≤k≤M−1 3.20 When −N ≤ k ≤ 0, by Assumption 2.5 and y−N 1Δ ξ−NΔ, E 2 sup ykΔ − yk − 1Δ −N≤k≤0 ≤E sup |ξkΔ − ξk − 1Δ| −N≤k≤0 ≤ αΔ. 2 3.21 Journal of Applied Mathematics 11 When 1 ≤ k ≤ M − 1, from 2.13, we have Δ Δ Δ − u yk−2Δ , rk−2 f y k−1Δ , rk−1 Δ ykΔ − yk − 1Δ u yk−1Δ , rk−1 Δ Δwk−1 . g yk−1Δ , rk−1 3.22 Recall the elementary inequality, for any x, y > 0 and ε ∈ 0, 1, x y2 ≤ x2 /ε y2 /1 − ε. Then ykΔ − yk − 1Δ2 2 1 Δ Δ Δ Δ − u yk−2Δ , rk−1 u yk−2Δ , rk−1 − u yk−2Δ , rk−2 u y k−1Δ , rk−1 ε 2 1 Δ Δ Δ g yk−1Δ , rk−1 Δwk−1 f y k−1Δ , rk−1 1−ε 2 8κ2 2 2κ2 ≤ y k−1Δ − yk−2Δ yk−2Δ ε ε 2 2 2 2 2 Δ Δ Δwk−1 . f y k−1Δ , rk−1 g yk−1Δ , rk−1 Δ 1−ε 1−ε ≤ 3.23 Consequently E 2 sup ykΔ − yk − 1Δ 1≤k≤M−1 2 2 8κ2 2κ2 E E sup yk−1Δ − y k−2Δ sup y k−2Δ ≤ ε ε 1≤k≤M−1 1≤k≤M−1 2 2 2 2Δ2 E sup f yk−1Δ , rt E sup g yk−1Δ , rt Δwk−1 . 1−ε 1−ε 1≤k≤M−1 1≤k≤M−1 3.24 We deal with these four terms, separately. By 3.21, E 2 sup y k−1Δ − yk−2Δ 1≤k≤M−1 ≤E sup 1≤k≤M−1 −N≤i≤0 ≤E 2 sup yk i − 1Δ − yk − 2 iΔ sup ykΔ − yk − 1Δ2 −N≤k≤M−1 12 Journal of Applied Mathematics 2 2 E sup ykΔ − yk − 1Δ ≤ E sup ykΔ − yk − 1Δ −N≤k≤0 1≤k≤M−1 2 . sup ykΔ − yk − 1Δ ≤ αΔ E 1≤k≤M−1 3.25 Noting that Esup−τ≤t≤T |yt|2 ≤ Esup−τ≤t≤T |yt|2 ≤ H2 where Hp has been defined in Lemma 3.1, by Assumption 2.3 and 2.15, E 2 Δ sup f y k−1Δ , rk−1 1≤k≤M−1 ≤E 2 sup K 1 y k−1Δ 1≤k≤M−1 ≤ K KE ≤ K KE ≤ K KE 2 sup yk − 1 iΔ sup 1≤k≤M−1 −N≤i≤0 ykΔ2 sup −N≤k≤M−1 2 sup yt 3.26 −τ≤t≤T ≤ K1 H2. By the Hölder inequality, for any integer l > 1, E 2 Δ Δwk−1 sup g yk−1Δ , rk−1 1≤k≤M−1 2 sup g y k−1Δ , rt sup |Δwk−1 |2 ≤E 1≤k≤M−1 ≤ E 1≤k≤M−1 2l/l−1 Δ sup g yk−1Δ , rk−1 l−1/l E 1≤k≤M−1 ≤ E 2 l/l−1 sup K 1 ykΔ 0≤k≤M−1 ⎡ ≤ ⎣K l/1−l E 1 1/l sup |Δwk−1 | 2l 1≤k≤M−1 l−1/l E M−1 |Δwk | 1/l 2l k0 2 sup ykΔ 0≤k≤M−1 l/l−1 ⎤l−1/l 1/l M−1 2l ⎦ E|Δwk | k0 Journal of Applied Mathematics ≤ 2 1/l−1 K l/1−l 13 1 E 2l/l−1 sup ykΔ l−1/l M−1 2l − 1!!Δ 0≤k≤M−1 " ≤ 2 1/l−1 K l/1−l 2l 1 H l−1 1/l l k0 #l−1/l 2l − 1!!T Δl−1 !1/l ≤ DlΔl−1/l , 3.27 where Dl is a constant dependent on l. Substituting 3.25, 3.26, and 3.27 into 3.24, choosing ε κ, and noting Δ ∈ 0, 1, we have 2 sup ykΔ − yk − 1Δ E 1≤k≤M−1 3.28 2κ 8κ 2K1 H2 2Dl l−1/l ≤ αΔ H2 Δ . 1 − 2κ 1 − 2κ 1 − 2κ2 Combining 3.21 with 3.28, from 3.20, we have E 2 sup ykΔ − yk−1Δ 0≤k≤M−1 ≤E sup −N≤k≤M−1 ≤E ≤ ykΔ − yk − 1Δ2 2 sup ykΔ − yk − 1Δ −N≤k≤0 E 2 sup ykΔ − yk − 1Δ 3.29 1≤k≤M−1 1 8κ 2K1 H2 2Dl l−1/l αΔ H2 Δ , 1 − 2κ 1 − 2κ 1 − 2κ2 as required. Lemma 3.3. If Assumptions 2.3–2.5 hold, E 2 sup ys − y s 0≤s≤T ≤ c2 c2 α2Δ c2 lΔl−1/l : βΔ, 3.30 where c2 , c2 are a constant independent of l and Δ, c2 l is a constant dependent on l but independent of Δ. 14 Journal of Applied Mathematics Proof. Fix any s ∈ 0, T and θ ∈ −τ, 0. Let ks ∈ {0, 1, 2, . . . , M − 1}, kθ ∈ {−N, −N 1, . . . , −1}, and ksθ ∈ {−N, −N 1, . . . , M−1} be the integers for which s ∈ ks Δ, ks 1Δ, θ ∈ kθ Δ, kθ 1Δ, and s θ ∈ ksθ Δ, ksθ 1Δ, respectively. Clearly, 0 ≤ s θ − ks kθ ≤ 2Δ, 3.31 ksθ − ks kθ ∈ {0, 1, 2}. From 2.7, y s yks Δ θ yks kθ Δ 3.32 θ − kθ Δ yks kθ 1Δ − yks kθ Δ , Δ which yields ys − y ys θ − y θ s ks Δ θ − kθ Δ ≤ ys θ − yks kθ Δ yks kθ 1Δ − yks kθ Δ Δ ≤ ys θ − yks kθ Δ yks kθ 1Δ − yks kθ Δ, 3.33 so by 3.20 and Lemma 3.2, noting yMΔ yM − 1Δ from 2.15, E 2 sup ys − y s ≤ 2E sup 0≤s≤T 0≤s≤T 2E ≤ 2E 2 sup ys θ − yks kθ Δ −τ≤θ≤0 sup 0≤ks ≤M−1 sup −τ≤θ≤0,0≤s≤T 2 sup yks kθ 1Δ − yks kθ Δ −N≤kθ ≤0 ys θ − yks kθ Δ2 2γΔ. 3.34 Therefore, it is a key to compute Esup−τ≤θ≤0,0≤s≤T |ys θ − yks kθ Δ|2 . We discuss the following four possible cases. Case 1 ks kθ ≥ 0. We again divide this case into three possible subcases according to ksθ − ks kθ ∈ {0, 1, 2}. Journal of Applied Mathematics 15 Subcase 1 ksθ − ks kθ 0. From 2.13, s θ − ksθ Δ y ksθ Δ − yksθ −1Δ , rkΔsθ ys θ − yks kθ Δ u yksθ −1 Δ Δ s θ Δ − u yksθ −1Δ , rksθ−1 f yv , rv dv ksθ Δ s θ ksθ Δ 3.35 g y v , rv dwv, which yields E ys θ − yks kθ Δ2 sup −τ≤θ≤0,0≤s≤T,ks kθ ≥0 ≤ 3E sup s θ − ksθ Δ Δ u y y − y , r ksθ −1Δ ksθ Δ ksθ −1Δ ksθ Δ −τ≤θ≤0,0≤s≤T,ksθ ≥0 2 −u y ksθ −1Δ , rkΔsθ−1 ⎛ 2 ⎞ s θ sup 3E⎝ f yr , rr dr ⎠ −τ≤θ≤0,0≤s≤T,ksθ ≥0 ksθ Δ ⎛ 2 ⎞ s θ sup 3E⎝ g y r , rr dwr ⎠. −τ≤θ≤0,0≤s≤T,ksθ ≥0 ksθ Δ 3.36 From Assumption 2.4, 3.24, 3.26, and Lemma 3.2, we have E 2 Δ s θ−k sθ Δ Δ u y −u yksθ −1Δ , rksθ−1 yksθ Δ −yksθ −1Δ , rksθ ksθ −1Δ Δ sup −τ≤θ≤0,0≤s≤T,ksθ ≥0 2 s θ − ksθ Δ 8κ2 H2 sup yksθ Δ − y ksθ −1Δ ≤ 2κ E Δ −τ≤θ≤0,0≤s≤T,ksθ ≥0 2 2 8κ2 H2 ≤ 2κ E sup y ksθ Δ − y ksθ −1Δ 2 −τ≤θ≤0,0≤s≤T,ksθ ≥0 ≤ 2κ E 2 sup 2 yksθ Δ − y ksθ −1Δ 0≤ksθ ≤M−1 8κ2 H2 ≤ 2κ2 γΔ 8κ2 H2. 3.37 16 Journal of Applied Mathematics By the Hölder inequality, Assumption 2.3, and Lemma 3.1, 2 ⎞ s θ f y r , rr dr ⎠ E⎝ sup −τ≤θ≤0,0≤s≤T,ksθ ≥0 ksθ Δ ⎛ ≤ ΔE s θ sup −τ≤θ≤0,0≤s≤T,ksθ ≥0 ksθ Δ ≤ KΔE f y , rr 2 dr r sup s θ −τ≤θ≤0,0≤s≤T,ksθ ≥0 ksθ Δ 2 1 yr dr T 2 1 sup yr dr ≤ KΔE 0 ≤ KΔ 0≤r≤T 1 E T T sup yt| 2 −τ≤t≤T 0 ≤ KΔ 3.38 dr 1 H2dr 0 ≤ KT 1 H2Δ. Setting v s θ and kv ksθ and applying the Hölder inequality yield 2 ⎞ s θ g y r , rr dwr ⎠ E⎝ sup −τ≤θ≤0,0≤s≤T,ksθ ≥0 ksθ Δ ⎛ E 2 g ykv Δ , rv wv − wkv Δ sup 0≤v≤T,0≤kv ≤M−1 ≤ E 2l/l−1 g y kv Δ , rv sup l−1/l 0≤v≤T,0≤kv ≤M−1 1/l × E |wv − wkv Δ| sup 2l . 0≤v≤T,0≤kv ≤M−1 The Doob martingale inequality gives E sup |wv − wkv Δ| 0≤v≤T,0≤kv ≤M−1 E 2l sup sup 0≤kv ≤M−1 kv Δ≤v≤kv 1Δ |wv − wkv Δ| 2l 3.39 Journal of Applied Mathematics M−1 ≤E 2l sup kv Δ≤v≤kv 1Δ kv 0 17 |wv − wkv Δ| M−1 E sup 2l |wv − wkv Δ| kv 0 kv Δ≤v≤kv 1Δ 2l M−1 E|wkv 1Δ − wkv Δ|2l . ≤ 2l 2l − 1 kv 0 3.40 By 3.27, we therefore have ⎛ 2 ⎞ s θ sup E⎝ g yr , rr dwr ⎠ k Δ −τ≤θ≤0,0≤s≤T,ksθ ≥0 sθ ≤ 2l 2l − 1 l−1/l 2 2l/l−1 E sup g ykv Δ , rv 0≤kv ≤M−1 1/l × M−1 3.41 E|wkv 1Δ − wkv Δ|2l kv 0 ≤ 2l 2l − 1 2 DlΔl−1/l . Substituting 3.37, 3.38, and 3.41 into 3.36 and noting Δ ∈ 0, 1 give E sup ys θ − yks kθ Δ2 −τ≤θ≤0,0≤s≤T,ks kθ ≥0 ≤ 6κ γΔ 24κ H2 3 KT 1 H2 2 2 2l 2l − 1 2 Dl Δl−1/l 3.42 : 6κ2 γΔ 24κ2 H2 c1 lΔl−1/l . Subcase2 ksθ − ks kθ 1. From 2.13, ys θ − yks kθ Δ yksθ Δ − yks kθ Δ ys θ − yksθ Δ ≤ u y ks kθ Δ , rkΔs kθ − u y ks kθ −1Δ , rkΔs kθ −1 f y ks kθ Δ , rkΔs kθ Δ g y ks kθ Δ , rkΔs kθ Δwks kθ ys θ − yksθ Δ, 3.43 18 Journal of Applied Mathematics so we have E ys θ − yks kθ Δ2 sup −τ≤θ≤0,0≤s≤T,ks kθ ≥0 ( ≤4 E 2 u y ks kθ Δ , rkΔs kθ − u y ks kθ −1Δ , rkΔs kθ −1 sup −τ≤θ≤0,0≤s≤T,ks kθ ≥0 E 2 f y ks kθ Δ , rkΔs kθ Δ sup E 3.44 2 g yks kθ Δ , rkΔs kθ Δwks kθ sup E −τ≤θ≤0,0≤s≤T,ks kθ ≥0 −τ≤θ≤0,0≤s≤T,ks kθ ≥0 ys θ − yksθ Δ2 sup ) . −τ≤θ≤0,0≤s≤T,ks kθ ≥0 Since E 2 u yks kθ Δ , rkΔs kθ − u yks kθ −1Δ , rkΔs kθ −1 sup −τ≤θ≤0,0≤s≤T,ks kθ ≥0 ≤ 2κ2 γΔ 8κ2 H2, 3.45 from 3.26, 3.27, and the Subcase 1, noting Δ ∈ 0, 1, we have E sup ys θ − yks kθ Δ2 −τ≤θ≤0,0≤s≤T,ks kθ ≥0 * ≤ 4 2κ2 γΔ 8κ2 H2 K1 H2Δ2 DlΔl−1/l + 3 2κ2 γΔ 8κ2 H2 Δ c1 lΔl−1/l 3.46 : 32κ2 γΔ 128κ2 H2 c2 lΔl−1/l . Subcase 3 ksθ − ks kθ 2. From 2.13, we have ys θ − yks kθ Δ ys θ − yksθ − 1Δ yksθ − 1Δ − yks kθ Δ, 3.47 Journal of Applied Mathematics 19 so from the Subcase 2, we have E ys θ − yks kθ Δ2 sup −τ≤θ≤0,0≤s≤T,ks kθ ≥0 ≤ 2E ys θ − yksθ − 1Δ2 sup −τ≤θ≤0,0≤s≤T,ks kθ ≥0 2E sup yksθ − 1Δ − yks kθ Δ2 −τ≤θ≤0,0≤s≤T,ks kθ ≥0 ≤ 2 32κ2 γΔ 128κ2 H2 c2 lΔl−1/l 3.48 ! 2 2κ2 γΔ 8κ2 H2 K1 H2Δ2 DlΔl−1/l ! : 68κ2 γΔ 272κ2 H2 c3 lΔl−1/l . From these three subcases, we have E ys θ − yks kθ Δ2 sup −τ≤θ≤0,0≤s≤T,ks kθ ≥0 3.49 ≤ 106κ2 γΔ 424κ2 H2 c1 l c2 l c3 lΔl−1/l . Case 2 ks kθ −1 and 0 ≤ s θ ≤ Δ. In this case, applying Assumption 2.5 and case 1, we have E sup −τ≤θ≤0,0≤s≤T ys θ − yks kθ Δ2 ≤ 2E sup −τ≤θ≤0,0≤s≤T ys θ − y02 2 2Ey0 − y−Δ 3.50 ≤ 212κ2 γΔ 848κ2 H2 2c1 l c2 l c3 lΔl−1/l 2αΔ. Case 3 ks kθ −1 and −Δ ≤ s θ ≤ 0. In this case, using Assumption 2.5, E sup −τ≤θ≤0,0≤s≤T ys θ − yks kθ Δ2 ≤ αΔ. 3.51 20 Journal of Applied Mathematics Case 4 ks kθ ≤ −2. In this case, s θ ≤ 0, so using Assumption 2.5, E sup −τ≤θ≤0,0≤s≤T ys θ − yks kθ Δ2 ≤ α2Δ. 3.52 Substituting these four cases into 3.34 and noting the expression of γΔ, there exist c2 , c2 , and c2 l such that E 2 sup ys − y s 0≤s≤T ≤ c2 α2Δ c2 c2 lΔl−1/l , 3.53 This proof is complete. Remark 3.4. It should be pointed out that much simpler proofs of Lemmas 3.2 and 3.3 can be obtained by choosing l 2 if we only want to prove Theorem 2.7. However, here we choose l > 1 to control the stochastic terms βΔ and γΔ by Δl−1/l in Section 3, which will be used to show the order of the strong convergence. Lemma 3.5. If Assumption 2.4 holds, E 2 sup u yt , rt − u yt , rt ≤ 8κ2 H2LΔ : ζΔ 3.54 0≤t≤T where L is a positive constant independent of Δ. Proof. Let n T/Δ, the integer part of T/Δ, and 1G be the indication function of the set G. Then, by Assumption 2.4 and Lemma 3.1, we obtain E 2 sup u y t , rt − u y t , rt 0≤t≤T ≤ max E 0≤k≤n 2 sup u y s , rs − u ys , rs s∈tk ,tk 1 ≤ 2max E 0≤k≤n 2 sup u ys , rs − u y s , rs 1{rs / rtk } s∈tk ,tk 1 ≤ 4max E sup 0≤k≤n s∈tk ,tk 1 ≤ 8κ max E 2 0≤k≤n 2 |uys , rs| u ys , rs 1{rs / rtk } 2 sup y t 0≤t≤T 2 E 1{rs / rtk } Journal of Applied Mathematics 21 ≤ 8κ2 H2E 1{rs / rtk } 8κ2 H2E E 1{rs / rtk } | tk , 3.55 where in the last step we use the fact that ytk and 1{rs / rtk } are conditionally independent with respect to the σ− algebra generated by rtk . But, by the Markov property, 1{rtk i} P rs / i | rtk i E 1{rs / rtk } | rtk i∈S 1{rtk i} ≤ γij s − tk os − tk j/ i i∈S 3.56 1{rtk i} max −γij Δ oΔ 1≤i≤N i∈S ≤ LΔ, where L is a positive constant independent of Δ. Then E 2 sup u y t , rt − u y t , rt ≤ 8κ2 H2LΔ. 3.57 0≤t≤T This proof is complete. Lemma 3.6. If Assumption 2.3 holds, there is a constant C, which is independent of Δ such that E T 0 E T 0 f y , rs − f y , rs 2 ds ≤ CΔ, s s 3.58 g y , rs − g y , rs 2 ds ≤ CΔ. s s 3.59 Proof. Let n T/Δ, the integer part of T/Δ. Then E T 0 n f y , rs − f y , rs 2 ds E s s k0 tk 1 2 f ytk , rs − f ytk , rtk ds, tk 3.60 22 Journal of Applied Mathematics with tn 1 being T . Let 1G be the indication function of the set G. Moreover, in what follows, C is a generic positive constant independent of Δ, whose values may vary from line to line. With these notations we derive, using Assumption 2.3, that tk 1 2 E f ytk , rs − f ytk , rtk ds tk ≤ 2E tk 1 " tk ≤ CE 2 # |fytk , rs|2 f ytk , rtk 1{rs / rtk } ds tk 1 tk 2 1 y tk 1{rs / rtk } ds 3.61 tk 1 " " ## 2 ≤C E E 1 ytk 1{rs / rtk } | rtk ds tk tk 1 " " # # 2 ≤C E E 1 ytk | rtk E 1{rs / rtk } | rtk ds, tk where in the last step we use the fact that ytk and 1{rs / rtk } are conditionally independent with respect to the σ− algebra generated by rtk . But, by the Markov property, E 1{rs / rtk } | rtk 1{rtk i} P rs / i | rtk i i∈S 1{rtk i} γij s − tk os − tk i∈S j/ i ≤ 1{rtk i} max −γij Δ oΔ i∈S 3.62 1≤i≤N ≤ CΔ. So, by Lemma 3.1, E tk 1 tk 1 2 2 1 Ey tk ds f y tk , rs − f y tk , rtk ds ≤ CΔ tk tk 3.63 ≤ CΔ . 2 Therefore E T 0 Similarly, we can show 3.59. f y , rs − f y , rs 2 ds ≤ CΔ. s s 3.64 Journal of Applied Mathematics 23 4. Convergence of the EM Methods In this section we will use the lemmas above to prove Theorem 2.7. From Lemma 3.1 and , such that Theorem 2.6, there exists a positive constant H E sup |xt| p −τ≤t≤T ∨E p sup yt −τ≤t≤T , ≤ H. 4.1 Let j be a sufficient large integer. Define the stopping times vj : inf t ≥ 0 : yt ≥ j , uj : inf t ≥ 0 : xt ≥ j , ρj : uj ∧ vj , 4.2 where we set inf ∅ ∞ as usual. Let et : xt − yt. 4.3 Obviously, E sup |et| 2 2 E E sup |et| 1{uj >T,vj >T } 0≤t≤T 0≤t≤T 2 sup |et| 1{uj ≤T or vj ≤T } 4.4 . 0≤t≤T Recall the following elementary inequality: aγ b1−γ ≤ γa 1 − γ b, 4.5 ∀a, b > 0, γ ∈ 0, 1. We thus have, for any δ > 0, E 2 sup |et| 1{uj ≤T or vj ≤T } ⎡ 2/p p δ−2/p−2 1{uj ≤T ≤ E⎣ δ sup |et| {0≤t≤T } 0≤t≤T ≤ 2δ E p sup |et|p 0≤t≤T p−2/p or vj ≤T } ⎤ ⎦ 4.6 p−2 2/p−2 P uj ≤ T or vj ≤ T . pδ Hence E sup |et| 2 ≤E 0≤t≤T 2 sup |et| 1{ρj >T } 0≤t≤T P uj ≤ T or vj ≤ T . 2/p−2 p−2 pδ 2δ p E sup |et| p 0≤t≤T 4.7 24 Journal of Applied Mathematics Now, xt p P uj ≤ T ≤ E 1{uj ≤T } p j 1 p ≤ p E sup |xt| j −τ≤t≤T 4.8 , H . jp ≤ Similarly, , H P vj ≤ T ≤ p . j 4.9 Thus P vj ≤ T or uj ≤ T ≤ P vj ≤ T P uj ≤ T 4.10 , 2H . jp ≤ We also have E sup |et| p ≤2 p−1 E 0≤t≤T p sup |xt | yt p 4.11 0≤t≤T p, ≤ 2 H. Moreover, E 2 sup |et| 1{ρj >T } 2 sup e t ∧ ρj 1{ρ >T } E 0≤t≤T j 0≤t≤T ≤E 2 . sup e t ∧ ρj 4.12 0≤t≤T Using these bounds in 4.7 yields E sup |et| 0≤t≤T 2 ≤E 2 sup e t ∧ ρj 0≤t≤T , , 2 p−2 H 2p 1 δH 2/p−2 p . p pδ j 4.13 Journal of Applied Mathematics 25 Setting v : t ∧ ρj and for any ε ∈ 0, 1, by the Hölder inequality, when v ∈ kΔ, k 1Δ, for k 0, 1, 2, . . . , M − 1, 2 |ev|2 xv − yv v − kΔ ≤ uxv , rv − u y k−1Δ y kΔ − yk−1Δ , rkΔ Δ v v 2 fxs , rs − f ys , rs ds gxs , rs − g y s , rs dws 0 0 2 1 v − kΔ ≤ uxv , rv − u y k−1Δ y kΔ − y k−1Δ , rkΔ ε Δ v v 2 2 2 T fxs , rs−f y s , rs ds gxs , rs−g y s , rs dws . 1−ε 0 0 4.14 Assumption 2.4 yields 2 v − kΔ Δ uxv , rv − u y y − y k−1Δ kΔ k−1Δ , rk Δ 2 v − kΔ 2 ≤ 2κ xv − y k−1Δ − y kΔ − y k−1Δ Δ v − kΔ 2u y k−1Δ ykΔ − y k−1Δ , rv Δ 2 v − kΔ −u y k−1Δ y kΔ − y k−1Δ , rkΔ Δ 2 v − kΔ xv − yv yv − y y − y − ≤ 2κ2 − y y kΔ v kΔ k−1Δ k−1Δ Δ v − kΔ 2u y k−1Δ ykΔ − y k−1Δ , rv Δ 2 v − kΔ −u yk−1Δ y kΔ − yk−1Δ , rkΔ Δ 2 2 2κ2 yv − y 2 xv − yv 2 4κ ≤ − y y v kΔ k−1Δ ε 1−ε v − kΔ 2u y k−1Δ ykΔ − y k−1Δ , rv Δ 2 v − kΔ Δ −uyk−1Δ ykΔ − yk−1Δ , rk . Δ 4.15 26 Journal of Applied Mathematics Then, we have 2 2 2 2κ2 4κ2 yv − y v y kΔ − y k−1Δ |ev| ≤ 2 xv − yv ε1 − ε ε v − kΔ 2u yk−1Δ y kΔ − yk−1Δ , rv Δ 2 v − kΔ −u y k−1Δ y kΔ − y k−1Δ , rkΔ Δ v v 2 2 2 T fxs , rs−f y s , rs ds gxs , rs−g ys , rs dws . 1−ε 0 0 4.16 2 Hence, for any t1 ∈ 0, T , by Lemmas 3.2–3.5, 2 2 2κ2 ≤ 2 E sup xt∧ρj − yt∧ρj E sup e t ∧ ρj ε 0≤t≤t1 0≤t≤t1 2 4κ2 E sup yt∧ρj − y t∧ρj ε1 − ε 0≤t≤t1 2 E sup ykΔ∧ρj − yk−1Δ∧ρj 0≤k≤M−1 kΔ ∧ ρj − kΔ y kΔ −y k−1Δ , r kΔ ∧ ρj 2E sup u y k−1Δ Δ 0≤k≤M−1 2 ⎤ kΔ ∧ ρj − kΔ y kΔ − y k−1Δ , r kΔ ∧ ρj ⎦ −u yk−1Δ Δ t1 ∧ρj 2 2T E fxs , rs − f y s , rs ds 1−ε 0 ⎡ 2 ⎤ t∧ρj 2 E⎣ sup gxs , rs − g y s , rs dws ⎦ 1−ε 0≤t≤t1 0 2 2κ2 4κ2 ≤ 2 E sup xt∧ρj − yt∧ρj γΔ βΔ 2ζΔ ε1 − ε ε 0≤t≤t1 t1 ∧ρj 2 2T E fxs , rs − f y s , rs ds 1−ε 0 ⎡ 2 ⎤ t∧ρj 2 E⎣ sup gxs , rs − g y s , rs dws ⎦. 1−ε 0≤t≤t1 0 4.17 Journal of Applied Mathematics 27 Since xt yt ξt when t ∈ −τ, 0, we have E 2 sup xt∧ρj − yt∧ρj ≤E 0≤t≤t1 2 sup sup x t ∧ ρj θ − y t ∧ ρj θ −τ≤θ≤0 0≤t≤t1 ≤E −τ≤t≤t1 E 2 sup x t ∧ ρj − y t ∧ ρj 4.18 2 sup x t ∧ ρj − y t ∧ ρj . 0≤t≤t1 By Assumption 2.2, Lemma 3.3, and Lemma 3.6, we may compute E t1 ∧ρj 0 fxs , rs − f y , rs 2 ds s ≤E t1 ∧ρj 0 ≤ 2Cj E fxs , rs − f y , rs f y , rs − f y , rs 2 ds s s s t1 ∧ρj 0 ≤ 4Cj E t1 ∧ρj xs − ys ys − y 2 ds 2CΔ s xs − ys 2 ds 4Cj E 0 ≤ 4Cj E t1 ∧ρj 0 ≤ 4Cj E t1 t1 ∧ρj 0 ys − y 2 ds 2CΔ s 2 sup xs θ − ys θ ds 4Cj T βΔ 2CΔ −τ≤θ≤0 2 sup x s ∧ ρj θ − y s ∧ ρj θ ds 0 −τ≤θ≤0 4Cj T βΔ 2CΔ t1 2 sup x r ∧ ρj − y r ∧ ρj ds 4Cj T βΔ 2CΔ ≤ 4Cj E 0 −τ≤r≤s 4Cj t1 0 2 E sup x r ∧ ρj − y r ∧ ρj ds 4Cj T βΔ 2CΔ. 0≤r≤s 4.19 By the Doob martingale inequality, Lemma 3.3, Lemma 3.6, and Assumption 2.2, we compute ⎡ 2 ⎤ t∧ρj E⎣ sup gxs , rs − g y s , rs dws ⎦ 0≤t≤t1 0 ⎡ 2 ⎤ t∧ρj E⎣ sup gxs , rs − g y s , rs g ys , rs − g y s , rs dws ⎦ 0≤t≤t1 0 28 Journal of Applied Mathematics ≤ 8Cj E t1 ∧ρj 0 xs − y 2 ds 8CΔ s t1 2 ≤ 16Cj E sup x r ∧ ρj − y r ∧ ρj ds 16Cj T βΔ 8CΔ. 0≤r≤s 0 4.20 Therefore, 4.17 can be written as 2κ2 1− 2 ε 2 E sup e t ∧ ρj 0≤t≤t1 ≤ 8Cj T T 4 4κ2 4CΔT 8 βΔ γΔ βΔ ε1 − ε 1−ε 1−ε 8Cj T 4 2ζΔ 1−ε t1 2 ds. E sup e v ∧ ρj 0 0≤v≤s 4.21 Choosing ε 1 E √ 2κ/2 and noting κ ∈ 0, 1, we have 2 sup e t ∧ ρj 0≤t≤t1 √ √ 2 T 1 2κ T 4 16κ2 1 2κ 16C j ≤ βΔ γΔ 2 2 √ √ √ √ βΔ 1 − 2κ 1 3 2κ 1 − 2κ 1 3 2κ √ 2 √ 2 8CΔT 8 1 2κ 2 1 2κ √ 2 √ √ 2 √ ζΔ 1 − 2κ 1 3 2κ 1 − 2κ 1 3 2κ 2 16Cj 1 2κ T 4 t1 2 E sup e s ∧ ρj dv √ 2 √ 0≤s≤v 1 − 2κ 1 3 2κ 0 ≤ √ 16Cj T T 4 16 8CΔT 8 √ 2 βΔ γΔ √ 2 βΔ √ 2 1 − 2κ 1 − 2κ 1 − 2κ 1− 2 √ 16Cj T 4 ζΔ √ 2 2κ 1 − 2κ t1 2 E sup e s ∧ ρj dv. 0 0≤s≤v 4.22 Journal of Applied Mathematics 29 By the Gronwall inequality, we have ⎡ 2 ⎢ E sup e t ∧ ρj ≤ ⎣ 0≤t≤t1 16Cj T T 4 16 √ 2 βΔ γΔ √ 2 βΔ 1 − 2κ 1 − 2κ 4.23 ⎤ √ 8CΔT 8 2ζΔ ⎥ 16/1− 2κ2 Cj T T 4 . √ ⎦ × e √ 2 1 − 2κ 1 − 2κ By 4.13, sup |et|2 E 0≤t≤T ⎡ 16Cj T T 4 16 8CΔT 8 √ 2 βΔ γΔ √ 2 βΔ √ 2 1 − 2κ 1 − 2κ 1 − 2κ ⎢ ≤ ⎣ ⎤ , 2 p−2 H 4.24 √ , 2ζΔ 2p 1 δH ⎥ 16/1− 2κ2 Cj T T 4 2/p−2 p . √ ⎦ × e p pδ j 1 − 2κ , ≤ /3, then choose Given any > 0, we can now choose δ sufficient small such that 2p 1 δH/p j sufficient large such that , 2 p−2 H pδ2/p−2 j p < , 3 4.25 and finally choose Δ so small such that ⎡ ⎤ T 4 16C T 16 8CΔT 8 2ζΔ j ⎢ ⎥ ⎣ √ ⎦ √ 2 βΔ γΔ √ 2 βΔ √ 2 1 − 2κ 1 − 2κ 1 − 2κ 1 − 2κ ×e √ 2 16/1− 2κ Cj T T 4 < 4.26 3 and thus Esup0≤t≤T |et|2 ≤ as required. Remark 4.1. Obviously, according to Theorem 2.7, for neutral stochastic delay differential equations with Markovian switching 19, we can easily obtain that the numerical solutions converge to the true solutions in mean square under Assumptions 2.2–2.4. 5. Convergence Order of the EM Method To reveal the convergence order of the EM method, we need the following assumptions. 30 Journal of Applied Mathematics Assumption 5.1. There exists a constant Q such that for all ϕ, ψ ∈ C−τ, 0; Rn , i ∈ S, and t ∈ 0, T , f ϕ, i − f ψ, i 2 ∨ g ϕ, i − g ψ, i 2 ≤ Qϕ − ψ 2 . 5.1 It is easy to see from the global Lipschitz condition that, for any ϕ ∈ C−τ, 0; Rn , 2 2 f ϕ, i ∨ g ψ, i ≤ 2 f0, i2 ∨ g0, i2 Qϕ2 . 5.2 In other words, the global Lipschitz condition implies linear growth condition with the growth coefficient ! 2 2 K 2 f0, i ∨ g0, i ∨ Q . 5.3 p Assumption 5.2. ξ ∈ LF0 −τ, 0; Rn for some p ≥ 2, and there exists a positive constant λ such that E sup |ξt − ξs| 2 −τ≤s≤t≤0 ≤ λt − s. 5.4 We can state another theorem, which reveals the order of the convergence. Theorem 5.3. If Assumptions 5.1, 5.2, and 2.4 hold, for any positive constant l > 1, E 2 sup xt − yt ≤ O Δ1−1/l . 5.5 0≤t≤T Proof. Since αΔ may be replaced by λΔ, from Lemmas 3.2 and 3.3, there exist constants c1 l and c2 l such that βΔ ≤ c1 lΔl−1/l and γΔ ≤ c2 lΔl−1/l . Here we do not need to define the stopping times uj and vj , and we may repeat the proof in Section 4 and directly compute E sup |et|2 0≤t≤T ⎡ ⎤ 16 2ζ 16QT T 4 8CT 8 ⎢ ⎥ ≤ ⎣ c1 l c2 l √ ⎦ √ 2 √ 2 c1 l √ 2 1 − 2κ 1 − 2κ 1 − 2κ 1 − 2κ √ 2 2κ QT T 4 × e16/1− ≤ O Δl−1/l . Δl−1/l 5.6 The proof is complete. Journal of Applied Mathematics 31 6. Conclusion The EM method for neutral stochastic functional differential equations with Markovian switching is studied. The results show that the numerical solution converges to the true solution under the local Lipschitz condition. In addition, the results also show that the order of convergence of the numerical method is close to 1, although the order of the strong convergence in mean square for the EM scheme applied to both SDEs and SFDEs is one 6, 7, 11 under the global Lipschitz condition. Hence, we can control the numerical solution’s error; this method may value some path-dependent options more quickly and simply 25. 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