On the Robustness of the Snell envelope

Abstract : We analyze the robustness properties of the Snell envelope backward evolution equation for the discrete time optimal stopping problem. We consider a series of approximation schemes, including cut-off type approximations, Euler discretization schemes, interpolation models, quantization tree models, and the Stochastic Mesh method of Broadie-Glasserman. In each situation, we provide non asymptotic convergence estimates, including Lp-mean error bounds and exponential concentration inequalities. We deduce these estimates from a single and general robustness property of Snell envelope semigroups. In particular, this analysis allows us to recover existing convergence results for the quantization tree method and to improve significantly the rates of convergence obtained for the Stochastic Mesh estimator of Broadie-Glasserman. In the second part of the article, we propose a new approach using a genealogical tree approximation of the reference Markov process in terms of a neutral type genetic model. In contrast to Broadie-Glasserman Monte Carlo models, the computational cost of this new stochastic particle approximation is linear in the number of sampled points. Some simulations results are provided and confirm the interest of this new algorithm.
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SIAM Journal on Financial Mathematics, SIAM, 2011, 2, pp.951-997. 〈10.1137/100798016〉
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https://hal.inria.fr/hal-00641452
Contributeur : Pierre Del Moral <>
Soumis le : mardi 15 novembre 2011 - 18:56:57
Dernière modification le : mardi 22 mai 2018 - 20:40:03

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Pierre Del Moral, P. Hu, Nadia Oudjane, Bruno Rémillard. On the Robustness of the Snell envelope. SIAM Journal on Financial Mathematics, SIAM, 2011, 2, pp.951-997. 〈10.1137/100798016〉. 〈hal-00641452〉

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