Weak Error Rates of Numerical Schemes for Rough Volatility

DOI10.1137/22M1485760zbMATH Open1517.91280OpenAlexW4320167437MaRDI QIDQ6159079FDOQ6159079

Authors Paul Gassiat 

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/2203.09298

zbMATH Keywords

fractional Brownian motionnumerical schemesrough volatilityweak convergence rates

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Fractional processes, including fractional Brownian motion (60G22) Probabilistic models, generic numerical methods in probability and statistics (65C20)

Abstract: Simulation of rough volatility models involves discretization of stochastic integrals where the integrand is a function of a (correlated) fractional Brownian motion of Hurst index $Hin(0,1/2)$. We obtain results on the rate of convergence for the weak error of such approximations, in the special cases when either the integrand is the fBm itself, or the test function is cubic. Our result states that the convergence is of order $(3H+frac12)wedge1$ for exact left-point discretization, and of order $H+frac12$ for the hybrid scheme with well-chosen weights.

Recommendations

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• Discretising the Heston model: an analysis of the weak convergence rate

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• WEAK ERROR RATES FOR OPTION PRICING UNDER LINEAR ROUGH VOLATILITY

Cited In (14)

• Functional central limit theorems for rough volatility
• Short communication: on the weak convergence rate in the discretization of rough volatility models
• A strong uniform approximation of fractional Brownian motion by means of transport processes
• A fast algorithm for simulation of rough volatility models
• WEAK ERROR RATES FOR OPTION PRICING UNDER LINEAR ROUGH VOLATILITY
• Discretising the Heston model: an analysis of the weak convergence rate
• Strong convergence rates for Markovian representations of fractional processes
• Title not available (Why is no real title available?)
• Cubature Method for Stochastic Volterra Integral Equations
• VALUE-AT-RISK COMPUTATIONS IN STOCHASTIC VOLATILITY MODELS USING SECOND-ORDER WEAK APPROXIMATION SCHEMES
• Statistical inference for rough volatility: minimax theory
• Refinement by reducing and reusing random numbers of the hybrid scheme for Brownian semistationary processes
• Efficient option pricing in the rough Heston model using weak simulation schemes
• On the Discrete-Time Simulation of the Rough Heston Model

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