Christian Bayer, Paul Hager, Sebastian Riedel, J. Schoenmakers
{"title":"具有签名的最佳停止","authors":"Christian Bayer, Paul Hager, Sebastian Riedel, J. Schoenmakers","doi":"10.1214/22-aap1814","DOIUrl":null,"url":null,"abstract":"We propose a new method for solving optimal stopping problems (such as American option pricing in finance) under minimal assumptions on the underlying stochastic process $X$. We consider classic and randomized stopping times represented by linear and non-linear functionals of the rough path signature $\\mathbb{X}^{<\\infty}$ associated to $X$, and prove that maximizing over these classes of signature stopping times, in fact, solves the original optimal stopping problem. Using the algebraic properties of the signature, we can then recast the problem as a (deterministic) optimization problem depending only on the (truncated) expected signature $\\mathbb{E}\\left[ \\mathbb{X}^{\\le N}_{0,T} \\right]$. By applying a deep neural network approach to approximate the non-linear signature functionals, we can efficiently solve the optimal stopping problem numerically. The only assumption on the process $X$ is that it is a continuous (geometric) random rough path. Hence, the theory encompasses processes such as fractional Brownian motion, which fail to be either semi-martingales or Markov processes, and can be used, in particular, for American-type option pricing in fractional models, e.g. on financial or electricity markets.","PeriodicalId":50979,"journal":{"name":"Annals of Applied Probability","volume":" ","pages":""},"PeriodicalIF":1.4000,"publicationDate":"2021-05-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"16","resultStr":"{\"title\":\"Optimal stopping with signatures\",\"authors\":\"Christian Bayer, Paul Hager, Sebastian Riedel, J. Schoenmakers\",\"doi\":\"10.1214/22-aap1814\",\"DOIUrl\":null,\"url\":null,\"abstract\":\"We propose a new method for solving optimal stopping problems (such as American option pricing in finance) under minimal assumptions on the underlying stochastic process $X$. We consider classic and randomized stopping times represented by linear and non-linear functionals of the rough path signature $\\\\mathbb{X}^{<\\\\infty}$ associated to $X$, and prove that maximizing over these classes of signature stopping times, in fact, solves the original optimal stopping problem. Using the algebraic properties of the signature, we can then recast the problem as a (deterministic) optimization problem depending only on the (truncated) expected signature $\\\\mathbb{E}\\\\left[ \\\\mathbb{X}^{\\\\le N}_{0,T} \\\\right]$. By applying a deep neural network approach to approximate the non-linear signature functionals, we can efficiently solve the optimal stopping problem numerically. The only assumption on the process $X$ is that it is a continuous (geometric) random rough path. Hence, the theory encompasses processes such as fractional Brownian motion, which fail to be either semi-martingales or Markov processes, and can be used, in particular, for American-type option pricing in fractional models, e.g. on financial or electricity markets.\",\"PeriodicalId\":50979,\"journal\":{\"name\":\"Annals of Applied Probability\",\"volume\":\" \",\"pages\":\"\"},\"PeriodicalIF\":1.4000,\"publicationDate\":\"2021-05-03\",\"publicationTypes\":\"Journal Article\",\"fieldsOfStudy\":null,\"isOpenAccess\":false,\"openAccessPdf\":\"\",\"citationCount\":\"16\",\"resultStr\":null,\"platform\":\"Semanticscholar\",\"paperid\":null,\"PeriodicalName\":\"Annals of Applied Probability\",\"FirstCategoryId\":\"100\",\"ListUrlMain\":\"https://doi.org/10.1214/22-aap1814\",\"RegionNum\":2,\"RegionCategory\":\"数学\",\"ArticlePicture\":[],\"TitleCN\":null,\"AbstractTextCN\":null,\"PMCID\":null,\"EPubDate\":\"\",\"PubModel\":\"\",\"JCR\":\"Q2\",\"JCRName\":\"STATISTICS & PROBABILITY\",\"Score\":null,\"Total\":0}","platform":"Semanticscholar","paperid":null,"PeriodicalName":"Annals of Applied Probability","FirstCategoryId":"100","ListUrlMain":"https://doi.org/10.1214/22-aap1814","RegionNum":2,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"STATISTICS & PROBABILITY","Score":null,"Total":0}
We propose a new method for solving optimal stopping problems (such as American option pricing in finance) under minimal assumptions on the underlying stochastic process $X$. We consider classic and randomized stopping times represented by linear and non-linear functionals of the rough path signature $\mathbb{X}^{<\infty}$ associated to $X$, and prove that maximizing over these classes of signature stopping times, in fact, solves the original optimal stopping problem. Using the algebraic properties of the signature, we can then recast the problem as a (deterministic) optimization problem depending only on the (truncated) expected signature $\mathbb{E}\left[ \mathbb{X}^{\le N}_{0,T} \right]$. By applying a deep neural network approach to approximate the non-linear signature functionals, we can efficiently solve the optimal stopping problem numerically. The only assumption on the process $X$ is that it is a continuous (geometric) random rough path. Hence, the theory encompasses processes such as fractional Brownian motion, which fail to be either semi-martingales or Markov processes, and can be used, in particular, for American-type option pricing in fractional models, e.g. on financial or electricity markets.
期刊介绍:
The Annals of Applied Probability aims to publish research of the highest quality reflecting the varied facets of contemporary Applied Probability. Primary emphasis is placed on importance and originality.