Strong convergence rates for Markovian representations of fractional processes

DOI10.3934/DCDSB.2020367zbMATH Open1462.60050arXiv1902.01471OpenAlexW3112101752MaRDI QIDQ2033871FDOQ2033871

Authors: Yanyan Li 

Publication date: 18 June 2021

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

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.

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

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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)

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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

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