Multi-Asset Spot and Option Market Simulation

Magnus Wiese, Ben Wood, Alexandre Pachoud, Ralf Korn, Hans Buehler, Phillip Murray and Lianjun Bai

Papers from arXiv.org

Abstract: We construct realistic spot and equity option market simulators for a single underlying on the basis of normalizing flows. We address the high-dimensionality of market observed call prices through an arbitrage-free autoencoder that approximates efficient low-dimensional representations of the prices while maintaining no static arbitrage in the reconstructed surface. Given a multi-asset universe, we leverage the conditional invertibility property of normalizing flows and introduce a scalable method to calibrate the joint distribution of a set of independent simulators while preserving the dynamics of each simulator. Empirical results highlight the goodness of the calibrated simulators and their fidelity.

Date: 2021-12
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