Multi-Asset Spot and Option Market Simulation
- URL: http://arxiv.org/abs/2112.06823v1
- Date: Mon, 13 Dec 2021 17:34:28 GMT
- Title: Multi-Asset Spot and Option Market Simulation
- Authors: Magnus Wiese, Ben Wood, Alexandre Pachoud, Ralf Korn, Hans Buehler,
Phillip Murray, Lianjun Bai
- Abstract summary: We construct realistic spot and equity option market simulators for a single underlying on the basis of normalizing flows.
We leverage the conditional invertibility property of normalizing flows and introduce a scalable method to calibrate the joint distribution of a set of independent simulators.
- Score: 52.77024349608834
- License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
- Abstract: We construct realistic spot and equity option market simulators for a single
underlying on the basis of normalizing flows. We address the
high-dimensionality of market observed call prices through an arbitrage-free
autoencoder that approximates efficient low-dimensional representations of the
prices while maintaining no static arbitrage in the reconstructed surface.
Given a multi-asset universe, we leverage the conditional invertibility
property of normalizing flows and introduce a scalable method to calibrate the
joint distribution of a set of independent simulators while preserving the
dynamics of each simulator. Empirical results highlight the goodness of the
calibrated simulators and their fidelity.
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