Markovian and product quantization of an R^d -valued Euler scheme of a diffusion process with applications to finance

Abstract : We introduce a new approach to quantize the Euler scheme of an R d-valued diffusion process. This method is based on a Markovian and componentwise product quantization and allows us, from a numerical point of view, to speak of fast quantization in dimension greater than one since the product quantization of the Euler scheme of the diffusion process and its companion weights and transition probabilities may be computed quite instantaneously using a Newton-Raphson algorithm. We show that the resulting quantization process is a Markov chain, then, we compute the associated companion weights and transition probabilities (for the quantized process and for its components) using closed formulas. From the analytical point of view, we show that the induced quantization errors at the k-th discretization step t k is a cumulative of the marginal quantization error up to time t k. Numerical experiments are performed for the pricing of a Basket call option and a European call option in a Heston model to show the performances of the method.
Type de document :
Pré-publication, Document de travail
2015
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https://hal.archives-ouvertes.fr/hal-01222936
Contributeur : Abass Sagna <>
Soumis le : samedi 14 novembre 2015 - 21:10:43
Dernière modification le : dimanche 26 mars 2017 - 01:06:24
Document(s) archivé(s) le : lundi 15 février 2016 - 10:21:15

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MarkovProdQuant.pdf
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  • HAL Id : hal-01222936, version 2
  • ARXIV : 1511.01758

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Fiorin Lucio, Gilles Pagès, Abass Sagna. Markovian and product quantization of an R^d -valued Euler scheme of a diffusion process with applications to finance. 2015. <hal-01222936v2>

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