The Seven-League Scheme: Deep Learning for Large Time Step Monte Carlo Simulations of Stochastic Differential Equations

We propose an accurate data-driven numerical scheme to solve stochastic differential equations (SDEs), by taking large time steps. The SDE discretization is built up by means of the polynomial chaos expansion method, on the basis of accurately determined stochastic collocation (SC) points. By employing an artificial neural network to learn these...

Advanced and Accurate Discretization Schemes for Relevant PDEs in Finance

This thesis studies advanced and accurate discretization schemes for relevant partial differential equations (PDEs) in finance. We start with techniques which may be particularly useful for the pricing of so-called vanilla financial options, European or American, and then move on to more complex models for the pricing of exotic options.<br/>

Collocating Volatility: A Competitive Alternative to Stochastic Local Volatility Models

We discuss a competitive alternative to stochastic local volatility models, namely the Collocating Volatility (CV) framework, introduced in [L. A. Grzelak (2019) The CLV framework-A fresh look at efficient pricing with smile, International Journal of Computer Mathematics 96 (11), 2209-2228]. The CV framework consists of two elements, a ...

Model-free stochastic collocation for an arbitrage-free implied volatility: Part I

This paper explains how to calibrate a stochastic collocation polynomial against market option prices directly. The method is first applied to the interpolation of short-maturity equity option prices in a fully arbitrage-free manner and then to the joint calibration of the constant maturity swap convexity adjustments with the interest rate...

Model-free stochastic collocation for an arbitrage-free implied volatility, part II

This paper explores the stochastic collocation technique, applied on a monotonic spline, as an arbitrage-free and model-free interpolation of implied volatilities. We explore various spline formulations, including B-spline representations. We explain how to calibrate the different representations against market option prices, detail how to...

Uncertainty quantification and Heston model

In this paper, we study the impact of the parameters involved in Heston model by means of Uncertainty Quantification. The Stochastic Collocation Method already used for example in computational fluid dynamics, has been applied throughout this work in order to compute the propagation of the uncertainty from the parameters of the model to the...

The stochastic collocation Monte Carlo sampler: Highly efficient sampling from ‘expensive’ distributions

In this article, we propose an efficient approach for inverting computationally expensive cumulative distribution functions. A collocation method, called the Stochastic Collocation Monte Carlo sampler (SCMC sampler), within a polynomial chaos expansion framework, allows us the generation of any number of Monte Carlo samples based on only a...

A novel Monte Carlo approach to hybrid local volatility models

We present in a Monte Carlo simulation framework, a novel approach for the evaluation of hybrid local volatility [Risk, 1994, 7, 18–20], [Int. J. Theor. Appl. Finance, 1998, 1, 61–110] models. In particular, we consider the stochastic local volatility model—see e.g. Lipton et al. [Quant. Finance, 2014, 14, 1899–1922], Piterbarg [Risk, 2007,...

On an efficient multiple time step Monte Carlo simulation of the SABR model

In this paper, we will present a multiple time step Monte Carlo simulation technique for pricing options under the Stochastic Alpha Beta Rho model. The proposed method is an extension of the one time step Monte Carlo method that we proposed in an accompanying paper Leitao et al. [Appl. Math. Comput. 2017, 293, 461–479], for pricing European...

Arbitrage-free approaches for pricing interest rate derivatives under the SABR model

This thesis is about pricing swaptions under the SABR model or a variant thereof. In the interest market a stochastic local volatility is often used by practitioners to describe the volatility curve in the strike dimension of swaptions. It is a fast approach to inter- and extrapolate market quotes. It is however well-known that this approach is...

Efficient uncertainty quantification in computational fluid dynamics

When modeling physical systems, several sources of uncertainty are present. For example, variability in boundary conditions like free stream velocity or ambient pressure are always present. Furthermore, uncertainties in geometry arise from production tolerances, wear or unknown deformations under loading. Uncertainties in computational fluid...

Efficient uncertainty quantification in unsteady aeroelastic simulations

An efficient uncertainty quantification method for unsteady problems is presented in order to achieve a constant accuracy in time for a constant number of samples. The approach is applied to the aeroelastic problems of a transonic airfoil flutter system and the AGARD 445.6 wing benchmark with uncertainties in the flow and the structure.

Efficient uncertainty quantification using a two-step approach with chaos collocation

In this paper a Two Step approach with Chaos Collocation for efficient uncertainty quantification in computational fluid-structure interactions is followed. In Step I, a Sensitivity Analysis is used to efficiently narrow the problem down from multiple uncertain parameters to one parameter which has the largest influence on the solution. In Step...

Efficient uncertainty quantification using a two-step approach with chaos collocation

In this paper a Two Step approach with Chaos Collocation for efficient uncertainty quantification in computational fluid-structure interactions is followed. In Step I, a Sensitivity Analysis is used to efficiently narrow the problem down from multiple uncertain parameters to one parameter which has the largest influence on the solution. In Step...