Computation of conditional expectations with guarantees

DOI10.1007/S10915-023-02130-8MaRDI QIDQ6159022zbMATH OpenOpenAlexFDO

Authors Patrick Cheridito, Balint Gersey

Publication date 20 June 2023

Published in Journal of Scientific Computing (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/2112.01804

zbMATH Keywords

least squares regressionMonte Carlo methodsconditional expectationnumerical guaranteestrustworthy AI

Mathematics Subject Classification ID

General nonlinear regression (62J02) Monte Carlo methods (65C05) Learning and adaptive systems in artificial intelligence (68T05) Probabilistic models, generic numerical methods in probability and statistics (65C20) Error analysis and interval analysis (65G99)

Abstract: Theoretically, the conditional expectation of a square-integrable random variable $Y$ given a $d$-dimensional random vector $X$ can be obtained by minimizing the mean squared distance between $Y$ and $f(X)$ over all Borel measurable functions $fcolonmathbb{R}^{d}omathbbR$. However, in many applications this minimization problem cannot be solved exactly, and instead, a numerical method which computes an approximate minimum over a suitable subfamily of Borel functions has to be used. The quality of the result depends on the adequacy of the subfamily and the performance of the numerical method. In this paper, we derive an expected value representation of the minimal mean squared distance which in many applications can efficiently be approximated with a standard Monte Carlo average. This enables us to provide guarantees for the accuracy of any numerical approximation of a given conditional expectation. We illustrate the method by assessing the quality of approximate conditional expectations obtained by linear, polynomial and neural network regression in different concrete examples.

Recommendations

• Computing Bounds on Expectations
• Accurate Computation of Conditional Expectation for Highly Nonlinear Problems
• Computing conditional expectations of multidimensional diffusion processes
• scientific article; zbMATH DE number 50805
• Theory & Methods: An Efficient Simulation Method for the Computation of a Class of Conditional Expectations
• On distributions of conditional expectations
• scientific article; zbMATH DE number 3864170

Cites work

• scientific article; zbMATH DE number 5822909 (Why is no real title available?)
• scientific article; zbMATH DE number 1069628 (Why is no real title available?)
• scientific article; zbMATH DE number 1066322 (Why is no real title available?)
• scientific article; zbMATH DE number 1156422 (Why is no real title available?)
• scientific article; zbMATH DE number 852536 (Why is no real title available?)
• A probabilistic numerical method for fully nonlinear parabolic PDEs
• A regression-based Monte Carlo method to solve backward stochastic differential equations
• Computing the distribution function of a conditional expectation via Monte Carlo: discrete conditioning spaces
• Deep learning
• Deep splitting method for parabolic PDEs
• Discrete-time approximation and Monte-Carlo simulation of backward stochastic differential equations
• Efficient risk estimation via nested sequential simulation
• Fundamentals of stochastic filtering
• Improved lower and upper bound algorithms for pricing American options by simulation
• Introduction to stochastic control theory
• Linear regression MDP scheme for discrete backward stochastic differential equations under general conditions
• Meilleures approximations et médianes conditionnelles
• Modern regression methods.
• Nested simulation in portfolio risk measurement
• On the calculation of the solvency capital requirement based on nested simulations
• Regression analysis by example
• Risk estimation via regression
• Stochastic finance. An introduction in discrete time.
• Valuation of the early-exercise price for options using simulations and nonparametric regression
• Valuing American options by simulation: a simple least-squares approach

Cited in

(3)

• Accurate Computation of Conditional Expectation for Highly Nonlinear Problems
• Computing Bounds on Expectations
• scientific article; zbMATH DE number 50805 (Why is no real title available?)

This page was built for publication: Computation of conditional expectations with guarantees

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6159022)