Strong convergence rates for Markovian representations of fractional processes

DOI10.3934/DCDSB.2020367MaRDI QIDQ2033871zbMATH OpenOpenAlexFDO

Authors Yanyan Li

Publication date 18 June 2021

Published in Discrete and Continuous Dynamical Systems. Series B (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1902.01471

zbMATH Keywords

fractional processesMonte Carlo simulationnumerical discretizationstrong convergence ratesMarkovian representationrough Bergomi model

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Gaussian processes (60G15) Numerical methods (including Monte Carlo methods) (91G60) Fractional processes, including fractional Brownian motion (60G22)

Abstract: Many fractional processes can be represented as an integral over a family of Ornstein-Uhlenbeck processes. This representation naturally lends itself to numerical discretizations, which are shown in this paper to have strong convergence rates of arbitrarily high polynomial order. This explains the potential, but also some limitations of such representations as the basis of Monte Carlo schemes for fractional volatility models such as the rough Bergomi model.

Recommendations

• Weak Error Rates of Numerical Schemes for Rough Volatility
• Weak and strong discrete-time approximation of fractional SDEs
• Affine representations of fractional processes with applications in mathematical finance
• Short communication: on the weak convergence rate in the discretization of rough volatility models
• Markovian approximations of stochastic Volterra equations with the fractional kernel

Cites work

• scientific article; zbMATH DE number 193549 (Why is no real title available?)
• scientific article; zbMATH DE number 1351867 (Why is no real title available?)
• A regularity structure for rough volatility
• Affine Volterra processes
• Affine representations of fractional processes with applications in mathematical finance
• Analysis in Banach spaces. Volume II. Probabilistic methods and operator theory
• Approximation of some processes
• Asymptotic analysis for stochastic volatility: martingale expansion
• Asymptotics for Rough Stochastic Volatility Models
• Chebyshev interpolation for parametric option pricing
• Fast and Exact Simulation of Stationary Gaussian Processes through Circulant Embedding of the Covariance Matrix
• Fractional Brownian motion and the Markov property
• Generalized Feller processes and Markovian lifts of stochastic Volterra processes: the affine case
• Hybrid scheme for Brownian semistationary processes
• Lifting the Heston model
• Magic Points in Finance: Empirical Integration for Parametric Option Pricing
• Markovian structure of the Volterra Heston model
• Maximal inequalities for the Ornstein-Uhlenbeck process
• Multifactor approximation of rough volatility models
• On the martingale property in the rough Bergomi model
• On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility
• Pathwise versions of the Burkholder-Davis-Gundy inequality
• Pricing under rough volatility
• Quadrature theory. The theory of numerical integration on a compact interval
• Representation of a fractional Brownian motion in terms of an infinite-dimensional Ornstein-Uhlenbeck process
• Short-time near-the-money skew in rough fractional volatility models
• The stochastic Fubini theorem revisited
• Turbocharging Monte Carlo pricing for the rough Bergomi model
• Volatility is rough

Cited in

(5)

• Approximation of Stochastic Volterra Equations with kernels of completely monotone type
• Short time behavior of the ATM implied skew in the ADO-Heston model
• Cubature Method for Stochastic Volterra Integral Equations
• Deep Curve-Dependent PDEs for Affine Rough Volatility
• Weak error for continuous time Markov chains related to fractional in time P(I)DEs

This page was built for publication: Strong convergence rates for Markovian representations of fractional processes

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2033871)