Tensor approximation of generalized correlated diffusions and functional copula operators

DOI10.1007/S11009-017-9545-8MaRDI QIDQ1703029zbMATH OpenOpenAlexWikidataFDO

Authors Antonio Dalessandro, Gareth W. Peters

Publication date 1 March 2018

Published in Methodology and Computing in Applied Probability (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/1502.06349, https://discovery.ucl.ac.uk/id/eprint/1557299/1/art%253A10.1007%252Fs11009-017-9545-8.pdf

zbMATH Keywords

copula infinitesimal generatorsmartingale representationsemimartingales decomposition

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Markov chains (discrete-time Markov processes on discrete state spaces) (60J10) Applications of continuous-time Markov processes on discrete state spaces (60J28) Measures of association (correlation, canonical correlation, etc.) (62H20)

Abstract: We investigate aspects of semimartingale decompositions, approximation and the martingale representation for multidimensional correlated Markov processes. A new interpretation of the dependence among processes is given using the martingale approach. We show that it is possible to represent, in both continuous and discrete space, that a multidimensional correlated generalized diffusion is a linear combination of processes that originate from the decomposition of the starting multidimensional semimartingale. This result not only reconciles with the existing theory of diffusion approximations and decompositions, but defines the general representation of infinitesimal generators for both multidimensional generalized diffusions and as we will demonstrate also for the specification of copula density dependence structures. This new result provides immediate representation of the approximate solution for correlated stochastic differential equations. We demonstrate desirable convergence results for the proposed multidimensional semimartingales decomposition approximations.

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Cited in

(2)

• Perturbation of functional tensors with applications to covariance operators.
• Efficient and accurate evaluation methods for concordance measures via functional tensor characterizations of copulas

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