Deep Curve-Dependent PDEs for Affine Rough Volatility

DOI10.1137/19M1267805zbMATH Open1516.91062OpenAlexW3109759108MaRDI QIDQ6159075FDOQ6159075

Authors Antoine Jacquier, Mugad Oumgari 

Publication date 1 June 2023

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1906.02551

zbMATH Keywords

deep learningpath-dependent PDEsrough volatility

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Artificial neural networks and deep learning (68T07) Applications of stochastic analysis (to PDEs, etc.) (60H30) PDEs on infinite-dimensional (e.g., function) spaces (= PDEs in infinitely many variables) (35R15)

Abstract: We introduce a new deep-learning based algorithm to evaluate options in affine rough stochastic volatility models. Viewing the pricing function as the solution to a curve-dependent PDE (CPDE), depending on forward curves rather than the whole path of the process, for which we develop a numerical scheme based on deep learning techniques. Numerical simulations suggest that the latter is a promising alternative to classical Monte Carlo simulations.

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Cited In (11)

• Calibrating rough volatility models: a convolutional neural network approach
• Lookback option pricing under the double Heston model using a deep learning algorithm
• A deep learning approach to the probabilistic numerical solution of path-dependent partial differential equations
• Interest rate convexity in a Gaussian framework
• Approximation rates for deep calibration of (rough) stochastic volatility models
• Learning the random variables in Monte Carlo simulations with stochastic gradient descent: Machine learning for parametric PDEs and financial derivative pricing
• Cubature Method for Stochastic Volterra Integral Equations
• Affine models with path-dependence under parameter uncertainty and their application in finance
• Pricing options under rough volatility with backward SPDEs
• Deep signature algorithm for multidimensional path-dependent options
• Deep learning volatility: a deep neural network perspective on pricing and calibration in (rough) volatility models

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