Coarse-graining of overdamped Langevin dynamics via the Mori-Zwanzig formalism

The Mori–Zwanzig formalism is applied to derive an equation for the evolution of linear observables of the overdamped Langevin equation. To illustrate the resulting equation and its use in deriving approximate models, a particular benchmark example is studied both numerically and via a formal asymptotic expansion. The example considered demonstrates the importance of memory effects in determining the correct temporal behaviour of such systems

Information-geometric Markov Chain Monte Carlo methods using Diffusions

Recent work incorporating geometric ideas in Markov chain Monte Carlo is reviewed in order to highlight these advances and their possible application in a range of domains beyond Statistics. A full exposition of Markov chains and their use in Monte Carlo simulation for Statistical inference and molecular dynamics is provided, with particular emphasis on methods based on Langevin diffusions. After this geometric concepts in Markov chain Monte Carlo are introduced. A full derivation of the Langevin diffusion on a Riemannian manifold is given, together with a discussion of appropriate Riemannian metric choice for different problems. A survey of applications is provided, and some open questions are discussed.Comment: 22 pages, 2 figure

Systemic Risk and Default Clustering for Large Financial Systems

As it is known in the finance risk and macroeconomics literature, risk-sharing in large portfolios may increase the probability of creation of default clusters and of systemic risk. We review recent developments on mathematical and computational tools for the quantification of such phenomena. Limiting analysis such as law of large numbers and central limit theorems allow to approximate the distribution in large systems and study quantities such as the loss distribution in large portfolios. Large deviations analysis allow us to study the tail of the loss distribution and to identify pathways to default clustering. Sensitivity analysis allows to understand the most likely ways in which different effects, such as contagion and systematic risks, combine to lead to large default rates. Such results could give useful insights into how to optimally safeguard against such events.Comment: in Large Deviations and Asymptotic Methods in Finance, (Editors: P. Friz, J. Gatheral, A. Gulisashvili, A. Jacqier, J. Teichmann) , Springer Proceedings in Mathematics and Statistics, Vol. 110 2015

Exact propagation of open quantum systems in a system-reservoir context

A stochastic representation of the dynamics of open quantum systems, suitable for non-perturbative system-reservoir interaction, non-Markovian effects and arbitrarily driven systems is presented. It includes the case of driving on timescales comparable to or shorter than the reservoir correlation time, a notoriously difficult but relevant case in the context of quantum information processing and quantum thermodynamics. A previous stochastic approach is re-formulated for the case of finite reservoir correlation and response times, resulting in a numerical simulation strategy exceeding previous ones by orders of magnitude in efficiency. Although the approach is based on a memory formalism, the dynamical equations propagated in the simulations are time-local. This leaves a wide range of choices in selecting the system to be studied and the numerical method used for propagation. For a series of tests, the dynamics of the spin-boson system is computed in various settings including strong external driving and Landau-Zener transitions.Comment: 7 pages, 4 figures. v2: inset in Fig. 2 and some text added, further references. v3: minor correction

From rough path estimates to multilevel Monte Carlo

New classes of stochastic differential equations can now be studied using rough path theory (e.g. Lyons et al. [LCL07] or Friz--Hairer [FH14]). In this paper we investigate, from a numerical analysis point of view, stochastic differential equations driven by Gaussian noise in the aforementioned sense. Our focus lies on numerical implementations, and more specifically on the saving possible via multilevel methods. Our analysis relies on a subtle combination of pathwise estimates, Gaussian concentration, and multilevel ideas. Numerical examples are given which both illustrate and confirm our findings.Comment: 34 page

Simple and extended Kalman filters : an application to term structures of commodity prices.

This article presents and compares two different Kalman filters. These methods provide a very interesting way to cope with the presence of non-observable variables, which is a frequent problem in finance. They are also very fast even in the presence of a large information volume. The first filter presented, which corresponds to the simplest version of a Kalman filter, can be used solely in the case of linear models. The second filter - the extended one - is a generalization of the first one, and it enables one to deal with non-linear models. However, it also introduces an approximation in the analysis, whose possible influence must be appreciated. The principles of the method and its advantages are first presented. It is then explained why it is interesting in the case of term structure models of commodity prices. Choosing a well-known term structure model, practical implementation problems are discussed and tested. Finally, in order to appreciate the impact of the approximation introduced for non-linear models, the two filters are compared.Term Structure; Commodity Future Prices; Kalman Filter;