Multilevel Richardson-Romberg extrapolation

Abstract : We propose and analyze a Multilevel Richardson-Romberg ($MLRR$) estimator which combines the higher order bias cancellation of the Multistep Richardson-Romberg ($MSRR$) method introduced in [Pages 07] and the variance control resulting from the stratification in the Multilevel Monte Carlo ($MLMC$) method (see [Heinrich, 01] and [Giles, 08]). Thus we show that in standard frameworks like discretization schemes of diffusion processes an assigned quadratic error $\varepsilon$ can be obtained with our ($MLRR$) estimator with a global complexity of $\log(1/\varepsilon)/\varepsilon^2$ instead of $(\log(1/\varepsilon))^2/\varepsilon^2$ with the standard ($MLMC$) method, at least when the weak error $E[Y_h]-E[Y_0]$ of the biased implemented estimator $Y_h$ can be expanded at any order in $h$. We analyze and compare these estimators on two numerical problems: the classical vanilla and exotic option pricing by Monte Carlo simulation and the less classical Nested Monte Carlo simulation.
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Vincent Lemaire, Gilles Pagès. Multilevel Richardson-Romberg extrapolation. Bernoulli, Bernoulli Society for Mathematical Statistics and Probability, 2017, 20 (3), pp.1029--1067. ⟨10.3150/16-BEJ822⟩. ⟨hal-00920660v3⟩



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