Nonnegativity preserving convolution kernels. Application to Stochastic Volterra Equations in closed convex domains and their approximation

arXiv2302.07758MaRDI QIDQ6426573FDOQ6426573

Publication date: 15 February 2023

Abstract: This work defines and studies convolution kernels that preserve nonnegativity. When the past dynamics of a process is integrated with a convolution kernel like in Stochastic Volterra Equations or in the jump intensity of Hawkes processes, this property allows to get the nonnegativity of the integral. We give characterizations of these kernels and show in particular that completely monotone kernels preserve nonnegativity. We then apply these results to analyze the stochastic invariance of a closed convex set by Stochastic Volterra Equations. We also get a comparison result in dimension one. Last, when the kernel is a positive linear combination of decaying exponential functions, we present a second order approximation scheme for the weak error that stays in the closed convex domain under suitable assumptions. We apply these results to the rough Heston model and give numerical illustrations.

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Convolution as an integral transform (44A35) Volterra integral equations (45D05) Computational methods for stochastic equations (aspects of stochastic analysis) (60H35)

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