Exact simulation scheme for the Ornstein–Uhlenbeck driven stochastic volatility model with the Karhunen–Loève expansions

IF 0.8 4区管理学 Q4 OPERATIONS RESEARCH & MANAGEMENT SCIENCE

Operations Research Letters Pub Date : 2025-03-18 DOI:10.1016/j.orl.2025.107280

Jaehyuk Choi

引用次数: 0

Abstract

This study proposes a fast exact simulation scheme for the Ornstein–Uhlenbeck driven stochastic volatility model. With the Karhunen–Loève expansions, the stochastic volatility path (Ornstein–Uhlenbeck process) is expressed as a sine series, and the time integrals of volatility and variance are analytically derived as infinite series of independent normal random variables. The new method is several hundred times faster than the existing method using numerical transform inversion. The simulation variance is further reduced with conditional simulation and the control variate.

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来源期刊

Operations Research Letters 管理科学-运筹学与管理科学

CiteScore

2.10

自引率

9.10%

发文量

111

审稿时长

83 days

期刊介绍： Operations Research Letters is committed to the rapid review and fast publication of short articles on all aspects of operations research and analytics. Apart from a limitation to eight journal pages, quality, originality, relevance and clarity are the only criteria for selecting the papers to be published. ORL covers the broad field of optimization, stochastic models and game theory. Specific areas of interest include networks, routing, location, queueing, scheduling, inventory, reliability, and financial engineering. We wish to explore interfaces with other fields such as life sciences and health care, artificial intelligence and machine learning, energy distribution, and computational social sciences and humanities. Our traditional strength is in methodology, including theory, modelling, algorithms and computational studies. We also welcome novel applications and concise literature reviews.