5 research outputs found
Physarum Powered Differentiable Linear Programming Layers and Applications
Consider a learning algorithm, which involves an internal call to an
optimization routine such as a generalized eigenvalue problem, a cone
programming problem or even sorting. Integrating such a method as layers within
a trainable deep network in a numerically stable way is not simple -- for
instance, only recently, strategies have emerged for eigendecomposition and
differentiable sorting. We propose an efficient and differentiable solver for
general linear programming problems which can be used in a plug and play manner
within deep neural networks as a layer. Our development is inspired by a
fascinating but not widely used link between dynamics of slime mold (physarum)
and mathematical optimization schemes such as steepest descent. We describe our
development and demonstrate the use of our solver in a video object
segmentation task and meta-learning for few-shot learning. We review the
relevant known results and provide a technical analysis describing its
applicability for our use cases. Our solver performs comparably with a
customized projected gradient descent method on the first task and outperforms
the very recently proposed differentiable CVXPY solver on the second task.
Experiments show that our solver converges quickly without the need for a
feasible initial point. Interestingly, our scheme is easy to implement and can
easily serve as layers whenever a learning procedure needs a fast approximate
solution to a LP, within a larger network
Numerical Optimisation Problems in Finance
This thesis consists of four projects regarding numerical optimisation and financial
derivative pricing.
The first project deals with the calibration of the Heston stochastic volatility
model. A method using the Levenberg-Marquardt algorithm with the analytical
gradient is developed. It is so far the fastest Heston model calibrator and meets the
speed requirement of practical trading.
In the second project, a triply-nested iterative method for the implementation of
interior-point methods for linear programs is proposed. It is the first time that an
interior-point method entirely based on iterative solvers succeeds in solving a fairly
large number of linear programming instances from benchmark libraries under the
standard stopping criteria.
The third project extends the Black-Scholes valuation to a complex volatility
parameter and presents its singularities at zero and infinity. Fractals that describe
the chaotic nature of the Newton-Raphson calculation of the implied volatility are
shown for different moneyness values. Among other things, these fractals visualise
dramatically the effect of an existing modification for improving the stability and
convergence of the search. The project studies scientifically an interesting problem
widespread in the financial industry, while revealing artistic values stemming from
mathematics.
The fourth project investigates the consistency of a class of stochastic volatility
models under spot rate inversion, and hence their suitability in the foreign exchange
market. The general formula of the model parameters for the inversion rate is given,
which provides basis for further investigation. The result is further extended to the
affine stochastic volatility model. The Heston model, among the other members
in the stochastic volatility family, is the only one that we found to be consistent
under the spot inversion. The conclusion on the Heston model verifies the arbitrage
opportunity in the variance swap