Error analysis of truncated expansion solutions to high-dimensional parabolic PDEs

DOI10.1051/M2AN/2017003zbMATH Open1382.65280arXiv1505.04639OpenAlexW2963884158MaRDI QIDQ3133570FDOQ3133570

Authors: Rasmus Wissmann, C. Reisinger 

Publication date: 2 February 2018

Published in: ESAIM: Mathematical Modelling and Numerical Analysis (Search for Journal in Brave)

Abstract: We study an expansion method for high-dimensional parabolic PDEs which constructs accurate approximate solutions by decomposition into solutions to lower-dimensional PDEs, and which is particularly effective if there are a low number of dominant principal components. The focus of the present article is the derivation of sharp error bounds for the constant coefficient case and a first and second order approximation. We give a precise characterisation when these bounds hold for (non-smooth) option pricing applications and provide numerical results demonstrating that the practically observed convergence speed is in agreement with the theoretical predictions.

Full work available at URL: https://arxiv.org/abs/1505.04639

Recommendations

• Analytical expansions for parabolic equations
• Overcoming the curse of dimensionality in the approximative pricing of financial derivatives with default risks
• Multilevel Picard approximations of high-dimensional semilinear partial differential equations with locally monotone coefficient functions
• Approximation of solutions to multidimensional parabolic equations by approximate approximations
• Hermite spectral method with hyperbolic cross approximations to high-dimensional parabolic PDEs

zbMATH Keywords

convergenceerror boundsasymptotic expansionsnumerical resultfinancial derivative pricinghigh-dimensional parabolic equations

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Initial value problems for second-order parabolic equations (35K15) Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Error bounds for initial value and initial-boundary value problems involving PDEs (65M15)

Cited In (2)

• Numerical valuation of Bermudan basket options via partial differential equations
• Efficient exposure computation by risk factor decomposition

This page was built for publication: Error analysis of truncated expansion solutions to high-dimensional parabolic PDEs

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q3133570)