Multilevel path simulation for jump-diffusion SDEs

DOI10.1007/978-3-642-27440-4_41MaRDI QIDQ5326141zbMATH OpenOpenAlexFDO

Authors Yuan Xia, Mike Giles

Publication date 31 July 2013

Published in Springer Proceedings in Mathematics & Statistics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1106.4730

zbMATH Keywords

finite rate activityjump-diffusion SDEsmultilevel Monte Carlo path simulation methodoption pricing

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

Abstract: We investigate the extension of the multilevel Monte Carlo path simulation method to jump-diffusion SDEs. We consider models with finite rate activity, using a jump-adapted discretisation in which the jump times are computed and added to the standard uniform dis- cretisation times. The key component in multilevel analysis is the calculation of an expected payoff difference between a coarse path simulation and a fine path simulation with twice as many timesteps. If the Poisson jump rate is constant, the jump times are the same on both paths and the multilevel extension is relatively straightforward, but the implementation is more complex in the case of state-dependent jump rates for which the jump times naturally differ.

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Cites work

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Cited in

(19)

• Efficient approximate solution of jump-diffusion SDEs via path-dependent adaptive step-size control
• On the implementation of multilevel Monte Carlo simulation of the stochastic volatility and interest rate model using multi-GPU clusters
• Unbiased parameter inference for a class of partially observed Lévy-process models
• Optimal importance sampling for Lévy processes
• Multilevel path simulation to jump-diffusion process with superlinear drift
• A continuation multilevel Monte Carlo algorithm
• A multi-level dimension reduction Monte-Carlo method for jump-diffusion models
• Multilevel Monte Carlo simulation for Lévy processes based on the Wiener-Hopf factorisation
• Multilevel Monte Carlo method for ergodic SDEs without contractivity
• Multi-index Monte Carlo: when sparsity meets sampling
• Importance sampling and statistical Romberg method for Lévy processes
• Multilevel Monte Carlo implementation for SDEs driven by truncated stable processes
• Multiscale Integration Schemes for Jump-Diffusion Systems
• Thinning and multilevel Monte Carlo methods for piecewise deterministic (Markov) processes with an application to a stochastic Morris-Lecar model
• Measuring impact of random jumps without sample path generation
• Optimization of mesh hierarchies in multilevel Monte Carlo samplers
• Adaptive importance sampling for multilevel Monte Carlo Euler method
• Monte Carlo convergence rates for kth moments in Banach spaces
• MLMC techniques for discontinuous functions

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