Neural variance reduction for stochastic differential equations

P. D. Hinds and M. V. Tretyakov

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Abstract: Variance reduction techniques are of crucial importance for the efficiency of Monte Carlo simulations in finance applications. We propose the use of neural SDEs, with control variates parameterized by neural networks, in order to learn approximately optimal control variates and hence reduce variance as trajectories of the SDEs are being simulated. We consider SDEs driven by Brownian motion and, more generally, by L\'{e}vy processes including those with infinite activity. For the latter case, we prove optimality conditions for the variance reduction. Several numerical examples from option pricing are presented.

Date: 2022-09, Revised 2023-05
New Economics Papers: this item is included in nep-cmp
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Published in Journal of Computational Finance, VOLUME 27, NUMBER 3 (2023)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2209.12885

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