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Approximation Rates for Deep Calibration of (Rough) Stochastic Volatility Models

Mathematical Finance 2023-09-27 v1 Numerical Analysis Numerical Analysis

Abstract

We derive quantitative error bounds for deep neural networks (DNNs) approximating option prices on a dd-dimensional risky asset as functions of the underlying model parameters, payoff parameters and initial conditions. We cover a general class of stochastic volatility models of Markovian nature as well as the rough Bergomi model. In particular, under suitable assumptions we show that option prices can be learned by DNNs up to an arbitrary small error ε(0,1/2)\varepsilon \in (0,1/2) while the network size grows only sub-polynomially in the asset vector dimension dd and the reciprocal ε1\varepsilon^{-1} of the accuracy. Hence, the approximation does not suffer from the curse of dimensionality. As quantitative approximation results for DNNs applicable in our setting are formulated for functions on compact domains, we first consider the case of the asset price restricted to a compact set, then we extend these results to the general case by using convergence arguments for the option prices.

Keywords

Cite

@article{arxiv.2309.14784,
  title  = {Approximation Rates for Deep Calibration of (Rough) Stochastic Volatility Models},
  author = {Francesca Biagini and Lukas Gonon and Niklas Walter},
  journal= {arXiv preprint arXiv:2309.14784},
  year   = {2023}
}

Comments

43 pages

R2 v1 2026-06-28T12:32:34.173Z