Multilevel Richardson-Romberg extrapolation

Abstract

International audienceWe propose and analyze a Multilevel Richardson-Romberg ($MLRR$) estimator which combines the higher order bias cancellation of the Multistep Richardson-Romberg ($MSRR$) method introduced in [Pages 07] and the variance control resulting from the stratification in the Multilevel Monte Carlo ($MLMC$) method (see [Heinrich, 01] and [Giles, 08]). Thus we show that in standard frameworks like discretization schemes of diffusion processes an assigned quadratic error $\varepsilon$ can be obtained with our ($MLRR$) estimator with a global complexity of $\log(1/\varepsilon)/\varepsilon^2$ instead of $(\log(1/\varepsilon))^2/\varepsilon^2$ with the standard ($MLMC$) method, at least when the weak error $E[Y_h]-E[Y_0]$ of the biased implemented estimator $Y_h$ can be expanded at any order in $h$. We analyze and compare these estimators on two numerical problems: the classical vanilla and exotic option pricing by Monte Carlo simulation and the less classical Nested Monte Carlo simulation