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| Main Authors: | , , , , |
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| Format: | Preprint |
| Published: |
2026
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2605.06670 |
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| _version_ | 1866915989835218944 |
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| author | Abbas-Turki, Lokman A Chassagneux, Jean-François Lemor, Jean-Philippe Loeper, Grégoire Sananes, Simon |
| author_facet | Abbas-Turki, Lokman A Chassagneux, Jean-François Lemor, Jean-Philippe Loeper, Grégoire Sananes, Simon |
| contents | The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control problem is high-dimensional. We propose a backward actor-critic stochastic policy gradient scheme tailored to this setting. The method combines a discrete dynamic programming principle with Proximal Policy Optimization and shallow neural-network approximations of both the value function and the control policy. A key ingredient is the policy parameterization: continuous controls are represented through a squashed Gaussian policy built on a C-vine representation of correlation matrices, which enforces positive semidefiniteness by construction. Numerical experiments on a range of multidimensional derivatives show that the method yields accurate prices, remains computationally efficient, and compares favorably with existing Monte Carlo and machine-learning-based benchmarks for robust pricing in the Uncertain Volatility Model. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2605_06670 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Stochastic Policy Gradient Methods in the Uncertain Volatility Model Abbas-Turki, Lokman A Chassagneux, Jean-François Lemor, Jean-Philippe Loeper, Grégoire Sananes, Simon Computational Finance Probability Pricing of Securities The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control problem is high-dimensional. We propose a backward actor-critic stochastic policy gradient scheme tailored to this setting. The method combines a discrete dynamic programming principle with Proximal Policy Optimization and shallow neural-network approximations of both the value function and the control policy. A key ingredient is the policy parameterization: continuous controls are represented through a squashed Gaussian policy built on a C-vine representation of correlation matrices, which enforces positive semidefiniteness by construction. Numerical experiments on a range of multidimensional derivatives show that the method yields accurate prices, remains computationally efficient, and compares favorably with existing Monte Carlo and machine-learning-based benchmarks for robust pricing in the Uncertain Volatility Model. |
| title | Stochastic Policy Gradient Methods in the Uncertain Volatility Model |
| topic | Computational Finance Probability Pricing of Securities |
| url | https://arxiv.org/abs/2605.06670 |