A path-dependent PDE solver based on signature kernels
Fuente:
arXiv
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| Auteurs principaux: | , |
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| Format: | Preprint |
| Publié: |
2024
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| _version_ | 1866908888369987584 |
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| author | Pannier, Alexandre Salvi, Cristopher |
| author_facet | Pannier, Alexandre Salvi, Cristopher |
| contents | We develop a kernel-based solver for path-dependent PDEs (PPDEs) along with a convergence theory. Our numerical scheme leverages signature kernels, a recently introduced class of kernels on path-space. Specifically, we solve an optimal recovery problem by approximating the solution of a PPDE with an element of minimal norm in the signature reproducing kernel Hilbert space constrained to satisfy the PPDE at a finite collection of collocation paths. In the linear case, we show that the optimisation has a unique closed-form solution expressed in terms of signature kernel evaluations at the collocation paths. Under strict assumptions, we prove consistency of the proposed scheme, guaranteeing convergence to the PPDE solution as the number of collocation points increases. Finally, several numerical examples are presented, in particular in the context of option pricing under rough volatility. Our numerical scheme constitutes a valid alternative to the ubiquitous Monte Carlo methods. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2403_11738 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | A path-dependent PDE solver based on signature kernels Pannier, Alexandre Salvi, Cristopher Numerical Analysis Computational Finance 35R15, 60L10, 65N35, 91G60 We develop a kernel-based solver for path-dependent PDEs (PPDEs) along with a convergence theory. Our numerical scheme leverages signature kernels, a recently introduced class of kernels on path-space. Specifically, we solve an optimal recovery problem by approximating the solution of a PPDE with an element of minimal norm in the signature reproducing kernel Hilbert space constrained to satisfy the PPDE at a finite collection of collocation paths. In the linear case, we show that the optimisation has a unique closed-form solution expressed in terms of signature kernel evaluations at the collocation paths. Under strict assumptions, we prove consistency of the proposed scheme, guaranteeing convergence to the PPDE solution as the number of collocation points increases. Finally, several numerical examples are presented, in particular in the context of option pricing under rough volatility. Our numerical scheme constitutes a valid alternative to the ubiquitous Monte Carlo methods. |
| title | A path-dependent PDE solver based on signature kernels |
| topic | Numerical Analysis Computational Finance 35R15, 60L10, 65N35, 91G60 |
| url | https://arxiv.org/abs/2403.11738 |