Integration by parts formula for locally smooth laws and applications to sensitivity computations

DOI10.1214/105051606000000592MaRDI QIDQ2467110zbMATH OpenOpenAlexFDO

Authors Vlad Bally, Marie-Pierre Bavouzet, Marouen Messaoud

Publication date 18 January 2008

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/math/0702884

zbMATH Keywords

Malliavin calculusMonte Carlo simulationsensitivitiespure jump diffusions

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Stochastic calculus of variations and the Malliavin calculus (60H07)

Abstract: We consider random variables of the form $F=f(V_1,\mathrm{...},V_n)$, where $f$ is a smooth function and $V_i,iinmathbbN$, are random variables with absolutely continuous law $p_i(y)dy$. We assume that $p_i$, $i=1,\mathrm{...},n$, are piecewise differentiable and we develop a differential calculus of Malliavin type based on $partialln{p}_i$. This allows us to establish an integration by parts formula $E(partia{l}_{i}phi(F)G)=E(phi(F)H_i(F,G))$, where $H_i(F,G)$ is a random variable constructed using the differential operators acting on $F$ and $G.$ We use this formula in order to give numerical algorithms for sensitivity computations in a model driven by a L'{e}vy process.

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Cited in

(20)

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• Computation of sensitivities for the invariant measure of a parameter dependent diffusion
• Sensitivity analysis for time-inhomogeneous Lévy process: a Malliavin calculus approach and numerics
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• Sensitivity analysis for averaged asset price dynamics with gamma processes
• Coefficients of asymptotic expansions of SDE with jumps
• Integration by parts formula for exit times of one dimensional diffusions
• Functionals of a Lévy process on canonical and generic probability spaces
• Sensitivities of options via Malliavin calculus: applications to markets of exponential variance gamma and normal inverse Gaussian processes
• Integration by parts formula and applications to equations with jumps
• Computation of Greeks for asset price dynamics driven by stable and tempered stable processes
• Quasi-invariance and integration by parts for determinantal and permanental processes
• Computation of Greeks and multidimensional density estimation for asset price models with time-changed Brownian motion
• Integration by Parts for Point Processes and Monte Carlo Estimation
• The Lévy-Khintchine type operators with variable Lipschitz continuous coefficients generate linear or nonlinear Markov processes and semigroups
• Derivative formula and coupling property for linear SDEs driven by Lévy processes
• An integration by parts formula in a Markovian regime switching model and application to sensitivity analysis

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