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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- On strong solutions for positive definite jump diffusions
- High order splitting schemes with complex timesteps and their application in mathematical finance
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- Some properties of the Wishart processes and a matrix extension of the Hartman-Watson laws
- On the application of Wishart process to the pricing of equity derivatives: the multi-asset case
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- Maximum principles for boundary-degenerate second order linear elliptic differential operators
- The log-asset dynamic with Euler-Maruyama scheme under Wishart processes
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