For a class of anisotropic integrodifferential operators arising as semigroup generators of Markov processes, we present a sparse tensor product wavelet compression scheme for the Galerkin finite element discretization of the corresponding integrodifferential equations u = f on [0,1]n with possibly large n. Under certain conditions on , the scheme is of essentially optimal and dimension independent complexity (h-1| log h |2(n-1)) without corrupting the convergence or smoothness requirements of the original sparse tensor finite element scheme. If the conditions on are not satisfied, the complexity can be bounded by (h-(1+ε)), where ε tends to zero with increasing number of the wavelets’ vanishing moments. Here h denotes the width of the corresponding finite element mesh. The operators under consideration are assumed to be of non-negative (anisotropic) order and admit a non-standard kernel κ that can be singular on all secondary diagonals. Practical examples of such operators from Mathematical Finance are given and some numerical results are presented.
@article{M2AN_2010__44_1_33_0, author = {Reich, Nils}, title = {Wavelet compression of anisotropic integrodifferential operators on sparse tensor product spaces}, journal = {ESAIM: Mathematical Modelling and Numerical Analysis - Mod\'elisation Math\'ematique et Analyse Num\'erique}, volume = {44}, year = {2010}, pages = {33-73}, doi = {10.1051/m2an/2009039}, mrnumber = {2647753}, zbl = {1189.65311}, language = {en}, url = {http://dml.mathdoc.fr/item/M2AN_2010__44_1_33_0} }
Reich, Nils. Wavelet compression of anisotropic integrodifferential operators on sparse tensor product spaces. ESAIM: Mathematical Modelling and Numerical Analysis - Modélisation Mathématique et Analyse Numérique, Tome 44 (2010) pp. 33-73. doi : 10.1051/m2an/2009039. http://gdmltest.u-ga.fr/item/M2AN_2010__44_1_33_0/
[1] A numerical procedure for calibration of volatility with American options. Appl. Math. Finance 12 (2005) 201-241. | Zbl 1138.91414
and ,[2] Variational analysis for the Black and Scholes equation with stochastic volatility. ESAIM: M2AN 36 (2002) 373-395. | Numdam | Zbl 1137.91421
and ,[3] Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics. J. Roy. Stat. Soc. 63 (2001) 167-241. | Zbl 0983.60028
and ,[4] Lévy processes. Cambridge University Press, Cambridge, UK (1996). | Zbl 0938.60005
,[5] The fast wavelet transform and numerical algorithms. Comm. Pure Appl. Math. 44 (1991) 141-183. | Zbl 0722.65022
, and ,[6] Multiscale problems and methods in numerical simulations, Lecture Notes in Mathematics 1825. Springer-Verlag, Berlin, Germany (2003).
, and ,[7] A note on the complexity of solving Poisson's equation for spaces of bounded mixed derivatives. J. Complexity 15 (1999) 167-199. | Zbl 0954.65078
and ,[8] Biorthogonal bases of compactly supported wavelets. Comm. Pure Appl. Math. 45 (1992) 485-560. | Zbl 0776.42020
, and ,[9] Adaptive wavelet methods for elliptic operator equations: convergence rates. Math. Comp. 70 (2001) 27-75 (electronic). | Zbl 0980.65130
, and ,[10] Adaptive wavelet methods. II. Beyond the elliptic case. Found. Comput. Math. 2 (2002) 203-245. | Zbl 1025.65056
, and ,[11] Financial modelling with jump processes. Chapman & Hall/CRC Financial Mathematics Series. Chapman & Hall/CRC, Boca Raton, USA (2004). | Zbl 1052.91043
and ,[12] A finite difference scheme for option pricing in jump diffusion and exponential Lévy models. SIAM J. Numer. Anal. 43 (2005) 1596-1626. | Zbl 1101.47059
and ,[13] Wavelets with complementary boundary conditions - function spaces on the cube. Results Math. 34 (1998) 255-293. | Zbl 0931.46006
and ,[14] Wavelet approximation methods for pseudodifferential equations. II. Matrix compression and fast solution. Adv. Comput. Math. 1 (1993) 259-335. | Zbl 0826.65093
, and ,[15] Multiscale methods for pseudo-differential equations on smooth closed manifolds, in Wavelets: theory, algorithms, and applications (Taormina, 1993), Wavelet Anal. Appl. 5, Academic Press, San Diego, USA (1994) 385-424. | Zbl 0847.65081
, and ,[16] Biorthogonal spline wavelets on the interval - stability and moment conditions. Appl. Comput. Harmon. Anal. 6 (1999) 132-196. | Zbl 0922.42021
, and ,[17] Compression techniques for boundary integral equations - asymptotically optimal complexity estimates. SIAM J. Numer. Anal. 43 (2006) 2251-2271 (electronic). | Zbl 1113.65114
, and ,[18] A general version of the fundamental theorem of asset pricing. Math. Ann. 300 (1994) 463-520. | Zbl 0865.90014
and ,[19] The variance-optimal martingale measure for continuous processes. Bernoulli 2 (1996) 81-105. | Zbl 0849.60042
and ,[20] Exponential hedging and entropic penalties. Math. Finance 12 (2002) 99-123. | Zbl 1072.91019
, , , , and ,[21] Stochastic Spectral Theory for Selfadjoint Feller Operators. Birkhäuser Verlag, Basel (2000). | Zbl 0980.60005
and ,[22] Nonlinear approximation, in Acta numerica (1998), Acta Numer. 7, Cambridge Univ. Press, Cambridge, UK (1998) 51-150. | Zbl 0931.65007
,[23] Theory and practice of Finite Elements. Springer Verlag, New York, USA (2004). | Zbl 1059.65103
and ,[24] Anisotropic stable Lévy copula processes - analytical and numerical aspects. Math. Models Methods Appl. Sci. 17 (2007) 1405-1443. | Zbl 1137.91446
, and ,[25] Computation of differential operators in wavelet coordinates. Math. Comp. 75 (2006) 697-709 (electronic). | Zbl 1158.65355
and ,[26] An optimal adaptive wavelet method without coarsening of the iterands. Math. Comp. 76 (2007) 615-629 (electronic). | Zbl 1115.41023
, and ,[27] Optimized general sparse grid approximation spaces for operator equations. Math. Comp. (to appear). | Zbl 1198.65053
and ,[28] Sparse grids for boundary integral equations. Numer. Math. 83 (1999) 279-312. | Zbl 0935.65131
, and ,[29] Biorthogonal wavelet bases for the boundary element method. Math. Nachr. 269/270 (2004) 167-188. | Zbl 1055.65136
and ,[30] Wavelet Galerkin schemes for boundary integral equations - implementation and quadrature. SIAM J. Sci. Comput. 27 (2006) 1347-1370 (electronic). | Zbl 1117.65162
and ,[31] Sparse wavelet methods for option pricing under stochastic volatility. J. Comput. Finance 8 (2005) 1-42.
, and ,[32] Numerical methods for Lévy processes. Finance Stoch. 13 (2009) 471-500. Special Issue on Computational Methods in Finance (Part II). | Zbl 1195.91175
, , and ,[33] Wavelet methods, in Encyclopedia of Quantitative Finance, R. Cont Ed., John Wiley & Sons Ltd., Chichester (to appear).
, and ,[34] Pseudo Differential Operators generating Markov Processes. Habilitationsschrift, University of Bielefeld, Germany (1998).
,[35] Linear partial differential operators, Grundlehren der Mathematischen Wissenschaften 116 [Fundamental Principles of Mathematical Sciences]. Springer-Verlag, Berlin, Germany (1963). | Zbl 0108.09301
,[36] The analysis of linear partial differential operators. III: Pseudodifferential operators, Grundlehren der Mathematischen Wissenschaften 274 [Fundamental Principles of Mathematical Sciences]. Springer-Verlag, Berlin, Germany (1985). | Zbl 0601.35001
,[37] Pseudo Differential Operators and Markov Processes, Vol. 2: Generators and their potential theory. Imperial College Press, London, UK (2002). | Zbl 1005.60004
,[38] Pseudo Differential Operators and Markov Processes, Vol. 3: Markov processes and applications. Imperial College Press, London, UK (2005). | Zbl 1076.60003
,[39] Integral operators on sparse grids. SIAM J. Numer. Anal. 39 (2001/2002) 1794-1809 (electronic). | Zbl 1011.41008
and ,[40] Two-scale Finite Element Discretizations for Infinitesimal Generators of Jump Processes in Finance. Research report 2008-23 Seminar for Applied Mathematics, ETH Zürich, Switzerland (2008).
, and ,[41] Fast deterministic pricing of options on Lévy driven assets. ESAIM: M2AN 38 (2004) 37-71. | Numdam | Zbl 1072.60052
, and ,[42] Wavelet Galerkin pricing of American contracts on Lévy driven assets. Quant. Finance 5 (2005) 403-424. | Zbl 1134.91450
, and ,[43] Finite element wavelets on manifolds. IMA J. Numer. Math. 23 (2003) 149-173. | Zbl 1016.65114
and ,[44] On N-term approximation by Haar functions in Hs-norms, in Metric Function Theory and Related Topics in Analysis, S.M. Nikolskij, B.S. Kashin and A.D. Izaak Eds., AFC, Moscow, Russia (1999) 137-163.
,[45] Multiscale analysis for jump processes in finance, in Numerical Mathematics and Advanced Applications, K. Kunisch, G. Of and O. Steinbach Eds., Springer Verlag, Berlin, Germany (2008) 415-422. | Zbl 1154.91473
,[46] Wavelet Compression of Anisotropic Integrodifferential Operators on Sparse Tensor Product Spaces. Ph.D. Thesis 17661, ETH Zürich, Switzerland (2008). Available at http://e-collection.ethbib.ethz.ch/view/eth:30174. | Zbl 1189.65311
,[47] Wavelet Compression of Integral Operators on Sparse Tensor Spaces - Construction, Consistency and Asymptotically Optimal Complexity. Research report 2008-24, Seminar for Applied Mathematics, ETH Zürich, Switzerland (2008).
,[48] Anisotropic operator symbols arising from multivariate jump processes. Integr. Equ. Oper. Theory 63 (2009) 127-150. | Zbl 1177.60069
,[49] On Kolmogorov equations for anisotropic multivariate Lévy processes. Finance Stoch. (to appear).
, and ,[50] | Zbl 0973.60001
, and Infinitely Divisible Distributions. Cambridge University Press, Cambridge, UK (1999).[51] Multiskalen- und Wavelet-Matrixkompression: Analysisbasierte Methoden zur Lösung großer vollbesetzter Gleichungssysteme. B.G. Teubner, Stuttgart, Germany (1998). | Zbl 0899.65063
,[52] Adaptive wavelet algorithms for elliptic PDE's on product domains. Math. Comp. 77 (2008) 71-92 (electronic). | Zbl 1127.41009
and ,[53] Monotone Operators in Banach Space and Nonliner Partial Differential Equations. American Mathematical Society, Rhode Island, USA (1997). | Zbl 0870.35004
,[54] Harmonic Analysis. Princeton University Press, Princeton, USA (1993). | Zbl 0821.42001
,[55] On the compressibility of operators in wavelet coordinates. SIAM J. Math. Anal. 35 (2004) 1110-1132 (electronic). | Zbl 1087.47012
,[56] Pseudodifferential operators. Princeton University Press, Princeton, USA (1981). | Zbl 0453.47026
,[57] Interpolation theory, function spaces, differential operators. Second edition, Johann Ambrosius Barth Verlag, Heidelberg, Germany (1995). | Zbl 0830.46028
,[58] Fully discrete multiscale Galerkin BEM, in Multiscale wavelet methods for PDEs, W. Dahmen, A. Kurdila and P. Oswald Eds., Academic Press, San Diego, USA (1997) 287-346.
and ,[59] Wavelet discretizations of parabolic integrodifferential equations. SIAM J. Numer. Anal. 41 (2003) 159-180 (electronic). | Zbl 1050.65134
and ,[60] Numerical solution of parabolic equations in high dimensions. ESAIM: M2AN 38 (2004) 93-127. | Numdam | Zbl 1083.65095
and ,[61] Multiwavelets for second-kind integral equations. SIAM J. Numer. Anal. 34 (1997) 2212-2227. | Zbl 0891.65121
, and ,[62] Wavelet Galerkin schemes for option pricing in multidimensional Lévy models. Ph.D. Thesis 18221, ETH Zürich, Switzerland (2009). Available at http://e-collection.ethbib.ethz.ch/view/eth:41555.
,