Snell envelope with small probability criteria

Pierre Del Moral 1 Peng Hu 1, * Nadia Oudjane 2, 3
* Corresponding author
1 ALEA - Advanced Learning Evolutionary Algorithms
Inria Bordeaux - Sud-Ouest, UB - Université de Bordeaux, CNRS - Centre National de la Recherche Scientifique : UMR5251
Abstract : We present a new algorithm to compute the Snell envelope in the specific case where the criteria to optimize is associated with a small probability or a rare event. This new approach combines the Stochastic Mesh approach of Broadie and Glasserman with a particle approximation scheme based on a specific change of measure designed to concentrate the computational effort in regions pointed out by the criteria. The theoretical analysis of this new algo- rithm provides non asymptotic convergence estimates. Finally, the numerical tests confirm the practical interest of this approach.
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Pierre Del Moral, Peng Hu, Nadia Oudjane. Snell envelope with small probability criteria. [Research Report] RR-7360, INRIA. 2011, pp.22. ⟨inria-00507794v2⟩

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