Another approach to some rough and stochastic partial differential equations

In this note we introduce a new approach to rough and stochastic partial differential equations (RPDEs and SPDEs): we consider general Banach spaces as state spaces and -- for the sake of simiplicity -- finite dimensional sources of noise, either rough or stochastic. By means of a time-dependent transformation of state space and rough path theory we are able to construct unique solutions of the respective R- and SPDEs. As a consequence of our construction we can apply the pool of results of rough path theory, in particular we obtain strong and weak numerical schemes of high order converging to the solution process

A Semigroup Point Of View On Splitting Schemes For Stochastic (Partial) Differential Equations

We construct normed spaces of real-valued functions with controlled growth on possibly infinite-dimensional state spaces such that semigroups of positive, bounded operators $(P_t)_{t\ge 0}$ thereon with $\lim_{t\to 0+}P_t f(x)=f(x)$ are in fact strongly continuous. This result applies to prove optimal rates of convergence of splitting schemes for stochastic (partial) differential equations with linearly growing characteristics and for sets of functions with controlled growth. Applications are general Da Prato-Zabczyk type equations and the HJM equations from interest rate theory

Generalized Feller processes and Markovian lifts of stochastic Volterra processes: the affine case

We consider stochastic (partial) differential equations appearing as Markovian lifts of affine Volterra processes with jumps from the point of view of the generalized Feller property which was introduced in e.g.~\cite{doetei:10}. In particular we provide new existence, uniqueness and approximation results for Markovian lifts of affine rough volatility models of general jump diffusion type. We demonstrate that in this Markovian light the theory of stochastic Volterra processes becomes almost classical.Comment: Revised version with several improvements and corrections. We are grateful to Sergio Pulido and an anonymous referee for pointing out inaccuracies. In particular the structure of path properties for generalized Feller processes is clear no

Fourier transform methods for pathwise covariance estimation in the presence of jumps

We provide a new non-parametric Fourier procedure to estimate the trajectory of the instantaneous covariance process (from discrete observations of a multidimensional price process) in the presence of jumps extending the seminal work Malliavin and Mancino~\cite{MM:02, MM:09}. Our approach relies on a modification of (classical) jump-robust estimators of integrated realized covariance to estimate the Fourier coefficients of the covariance trajectory. Using Fourier-F\'ejer inversion we reconstruct the path of the instantaneous covariance. We prove consistency and central limit theorem (CLT) and in particular that the asymptotic estimator variance is smaller by a factor $2/3$ in comparison to classical local estimators. The procedure is robust enough to allow for an iteration and we can show theoretically and empirically how to estimate the integrated realized covariance of the instantaneous stochastic covariance process. We apply these techniques to robust calibration problems for multivariate modeling in finance, i.e., the selection of a pricing measure by using time series and derivatives' price information simultaneously.Comment: revised and slightly shortened final versio

The proof of Tchakaloff's Theorem

We provide a simple proof of Tchakaloff's Theorem on the existence of cubature formulas of degree $m$ for Borel measures with moments up to order $m$. The result improves known results for non-compact supports, since we do not need conditions on $(m+1)$st moments

The G\"{a}rtner-Ellis theorem, homogenization, and affine processes

We obtain a first order extension of the large deviation estimates in the G\"{a}rtner-Ellis theorem. In addition, for a given family of measures, we find a special family of functions having a similar Laplace principle expansion up to order one to that of the original family of measures. The construction of the special family of functions mentioned above is based on heat kernel expansions. Some of the ideas employed in the paper come from the theory of affine stochastic processes. For instance, we provide an explicit expansion with respect to the homogenization parameter of the rescaled cumulant generating function in the case of a generic continuous affine process. We also compute the coefficients in the homogenization expansion for the Heston model that is one of the most popular stock price models with stochastic volatility

Finite dimensional Realizations of Stochastic Equations

This paper discusses finite-dimensional (Markovian) realizations (FDRs) for Heath-Jarrow-Morton interest rate models. We consider a d-dimensional driving Brownian motion and stochastic volatility structures that are non-degenerate smooth functionals of the current forward rate. In a recent paper, Bj\"ork and Svensson give sufficient and necessary conditions for the existence of FDRs within a particular Hilbert space setup. We extend their framework, provide new results on the geometry of the implied FDRs and classify all of them. In particular, we prove their conjecture that every short rate realization is 2-dimensional. More generally, we show that all generic FDRs are at least (d+1)-dimensional and that all generic FDRs are affine. As an illustration we sketch an interest rate model, which goes well with the Svensson curve-fitting method. These results cannot be obtained in the Bj\"ork-Svensson setting. A substantial part of this paper is devoted to analysis on Fr\'echet spaces, where we derive a Frobenius theorem. Though we only consider stochastic equations in the HJM-framework, many of the results carry over to a more general setup

A convergence result for the Emery topology and a variant of the proof of the fundamental theorem of asset pricing

We show that \emph{No unbounded profit with bounded risk} (NUPBR) implies \emph{predictable uniform tightness} (P-UT), a boundedness property in the Emery topology which has been introduced by C. Stricker \cite{S:85}. Combining this insight with well known results from J. M\'emin and L. S{\l}ominski \cite{MS:91} leads to a short variant of the proof of the fundamental theorem of asset pricing initially proved by F. Delbaen and W. Schachermayer \cite{DS:94}. The results are formulated in the general setting of admissible portfolio wealth processes as laid down by Y. Kabanov in \cite{kab:97}.Comment: slightly extended version and list of reference

An elementary proof of the reconstruction theorem

The reconstruction theorem, a cornerstone of Martin Hairer's theory of regularity structures, appears in this article as the unique extension of the explicitly given reconstruction operator on the set of smooth models due its inherent Lipschitz properties. This new proof is a direct consequence of constructions of mollification procedures on spaces of models and modelled distributions: more precisely, for an abstract model $Z$ of a given regularity structure, a mollified model is constructed, and additionally, any modelled distribution $f$ can be approximated by elements of a universal subspace of modelled distribution spaces. These considerations yield in particular a non-standard approximation results for rough path theory. All results are formulated in a generic $(p,q)$ Besov setting

Smooth perfectness through decomposition of diffeomorphisms into fiber preserving ones

We show that on a closed smooth manifold $M$ equipped with $k$ fiber bundle structures whose vertical distributions span the tangent bundle, every smooth diffeomorphism $f$ of $M$ sufficiently close to the identity can be written as a product $f=f_1... f_k$, where $f_i$ preserves the $i^{\text{th}}$-fiber. The factors $f_i$ can be chosen smoothly in $f$. We apply this result to show that on a certain class of closed smooth manifolds every diffeomorphism sufficiently close to the identity can be written as product of commutators and the factors can be chosen smoothly. Furthermore we get concrete estimates on how many commutators are necessary