Exact and high-order discretization schemes for Wishart processes and their affine extensions
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Publication:1950261
stochastic differential equationexact simulationBrownian motionsaffine processesWishart processesCox-Ingersoll-Ross processdiscretization schemesWishart distributionsBartlett's decomposition
Brownian motion (60J65) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) PDEs with randomness, stochastic partial differential equations (35R60) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35) Numerical solutions to stochastic differential and integral equations (65C30) Stochastic models in economics (91B70)
Abstract: This work deals with the simulation of Wishart processes and affine diffusions on positive semidefinite matrices. To do so, we focus on the splitting of the infinitesimal generator, in order to use composition techniques as Ninomiya and Victoir or Alfonsi. Doing so, we have found a remarkable splitting for Wishart processes that enables us to sample exactly Wishart distributions, without any restriction on the parameters. It is related but extends existing exact simulation methods based on Bartlett's decomposition. Moreover, we can construct high-order discretization schemes for Wishart processes and second-order schemes for general affine diffusions. These schemes are in practice faster than the exact simulation to sample entire paths. Numerical results on their convergence are given.
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Cited in
(20)- Affine processes on positive semidefinite \(d \times d\) matrices have jumps of finite variation in dimension \(d > 1\)
- Computing functionals of square root and Wishart processes under the benchmark approach via exact simulation
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- On the application of Wishart process to the pricing of equity derivatives: the multi-asset case
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- A perturbation analysis of stochastic matrix Riccati diffusions
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- European option pricing under Wishart processes
- Some properties of the Wishart processes and a matrix extension of the Hartman-Watson laws
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- Simple simulation schemes for CIR and Wishart processes
- Calibration and advanced simulation schemes for the Wishart stochastic volatility model
- Maximum likelihood estimation for Wishart processes
- The log-asset dynamic with Euler-Maruyama scheme under Wishart processes
- On strong solutions for positive definite jump diffusions
- A new class of multidimensional Wishart-based hybrid models
- The explicit Laplace transform for the Wishart process
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