TY - JOUR
T1 - A deep learning-based Monte Carlo simulation scheme for stochastic differential equations driven by fractional Brownian motion
AU - Gao, Fei
AU - Oosterlee, Cornelis W.
AU - Zhang, Jiangshe
N1 - Publisher Copyright:
© 2024 Elsevier B.V.
PY - 2024/3/14
Y1 - 2024/3/14
N2 - Stochastic differential equations (SDEs) are widely used models to describe the evolution of stochastic processes. Among them, SDEs driven by fractional Brownian motion (fBm) have been shown to be capable of describing systems with temporal dependencies. In this paper, we develop a neural network based Monte Carlo methodology in which we can efficiently simulate SDEs that are governed by fBm. Particularly, we focus on large time step simulations. A property of fBm that complicates the development of such Monte Carlo schemes is the long-range temporal correlation. To this end, we build the network based on the encoder–decoder framework and employ the attention mechanism to learn the temporal relationships in the historical paths of such SDEs. In addition, a loss function based on the quantile loss is used, where the quantile levels to be predicted are determined by means of the stochastic collocation method. Experimental results show that this kind of loss function is superior to conventional loss functions in terms of solution accuracy, and the resulting scheme can learn and simulate SDEs driven by fBm accurately and highly efficiently.
AB - Stochastic differential equations (SDEs) are widely used models to describe the evolution of stochastic processes. Among them, SDEs driven by fractional Brownian motion (fBm) have been shown to be capable of describing systems with temporal dependencies. In this paper, we develop a neural network based Monte Carlo methodology in which we can efficiently simulate SDEs that are governed by fBm. Particularly, we focus on large time step simulations. A property of fBm that complicates the development of such Monte Carlo schemes is the long-range temporal correlation. To this end, we build the network based on the encoder–decoder framework and employ the attention mechanism to learn the temporal relationships in the historical paths of such SDEs. In addition, a loss function based on the quantile loss is used, where the quantile levels to be predicted are determined by means of the stochastic collocation method. Experimental results show that this kind of loss function is superior to conventional loss functions in terms of solution accuracy, and the resulting scheme can learn and simulate SDEs driven by fBm accurately and highly efficiently.
KW - Deep learning
KW - Fractional Brownian motion
KW - Fractional Ornstein–Uhlenbeck process
KW - Numerical simulation
KW - Option pricing
KW - Stochastic differential equations
UR - https://www.scopus.com/pages/publications/85183315980
U2 - 10.1016/j.neucom.2024.127245
DO - 10.1016/j.neucom.2024.127245
M3 - 文章
AN - SCOPUS:85183315980
SN - 0925-2312
VL - 574
JO - Neurocomputing
JF - Neurocomputing
M1 - 127245
ER -