arXiv subjects

Sylvain Corlay

Publications and source records attributed to Sylvain Corlay.

6 recordsLinked to original sources

arXiv2015

B-spline techniques for volatility modeling

This paper is devoted to the application of B-splines to volatility modeling, specifically the calibration of the leverage function in stochastic local volatility models and the parameterization of an arbitrage-free implied volatility surface calibrated to sparse option data. We use an extension of classical B-splines obtained by including basis functions with infinite support. We first come back to the application of shape-constrained B-splines to the estimation of conditional expectations, not merely from a scatter plot but also from the given marginal distributions. An application is the Monte Carlo calibration of stochastic local volatility models by Markov projection. Then we present a new technique for the calibration of an implied volatility surface to sparse option data. We use a B-spline parameterization of the Radon-Nikodym derivative of the underlying's risk-neutral probability density with respect to a roughly calibrated base model. We show that this method provides smooth arbitrage-free implied volatility surfaces. Finally, we sketch a Galerkin method with B-spline finite elements to the solution of the partial differential equation satisfied by the Radon-Nikodym derivative.

q-fin.CP↗

arXiv2014

Functional quantization-based stratified sampling methods

In this article, we propose several quantization-based stratified sampling methods to reduce the variance of a Monte Carlo simulation. Theoretical aspects of stratification lead to a strong link between optimal quadratic quantization and the variance reduction that can be achieved with stratified sampling. We first put the emphasis on the consistency of quantization for partitioning the state space in stratified sampling methods in both finite and infinite dimensional cases. We show that the proposed quantization-based strata design has uniform efficiency among the class of Lipschitz continuous functionals. Then a stratified sampling algorithm based on product functional quantization is proposed for path-dependent functionals of multi-factor diffusions. The method is also available for other Gaussian processes such as Brownian bridge or Ornstein-Uhlenbeck processes. We derive in detail the case of Ornstein-Uhlenbeck processes. We also study the balance between the algorithmic complexity of the simulation and the variance reduction factor

math.PR↗

arXiv2014

Properties of the Ornstein-Uhlenbeck bridge

This paper presents a study of the properties of the Ornstein-Uhlenbeck bridge, specifically, we derive its Karhunen-Loève expansion for any value of the initial variance and mean-reversion parameter (or mean-repulsion if negative). We also show that its canonical decomposition can be obtained using some techniques related to generalized bridges. Finally, we present an application to the optimal functional quantization of the Ornstein-Uhlenbeck bridge.

math.PR↗

arXiv2012

Partial functional quantization and generalized bridges

In this article, we develop a new approach to functional quantization, which consists in discretizing only a finite subset of the Karhunen-Loève coordinates of a continuous Gaussian semimartingale $X$. Using filtration enlargement techniques, we prove that the conditional distribution of $X$ knowing its first Karhunen-Loève coordinates is a Gaussian semimartingale with respect to a bigger filtration. This allows us to define the partial quantization of a solution of a stochastic differential equation with respect to $X$ by simply plugging the partial functional quantization of $X$ in the SDE. Then we provide an upper bound of the $L^p$-partial quantization error for the solution of SDEs involving the $L^{p+\varepsilon}$-partial quantization error for $X$, for $\varepsilon >0$. The $a.s.$ convergence is also investigated. Incidentally, we show that the conditional distribution of a Gaussian semimartingale $X$, knowing that it stands in some given Voronoi cell of its functional quantization, is a (non-Gaussian) semimartingale. As a consequence, the functional stratification method developed in [6] amounted, in the case of solutions of SDEs, to using the Euler scheme of these SDEs in each Voronoi cell.

math.PR↗

arXiv2011

A fast nearest neighbor search algorithm based on vector quantization

In this article, we propose a new fast nearest neighbor search algorithm, based on vector quantization. Like many other branch and bound search algorithms [1,10], a preprocessing recursively partitions the data set into disjointed subsets until the number of points in each part is small enough. In doing so, a search-tree data structure is built. This preliminary recursive data-set partition is based on the vector quantization of the empirical distribution of the initial data-set. Unlike previously cited methods, this kind of partitions does not a priori allow to eliminate several brother nodes in the search tree with a single test. To overcome this difficulty, we propose an algorithm to reduce the number of tested brother nodes to a minimal list that we call "friend Voronoi cells". The complete description of the method requires a deeper insight into the properties of Delaunay triangulations and Voronoi diagrams

cs.DS↗

arXiv2010

The Nyström method for functional quantization with an application to the fractional Brownian motion

In this article, the so-called "Nyström method" is tested to compute optimal quantizers of Gaussian processes. In particular, we derive the optimal quantization of the fractional Brownian motion by approximating the first terms of its Karhunen-Loève decomposition. A numerical test of the "functional stratification" variance reduction algorithm is performed with the fractional Brownian motion.

math.PR↗