English

Optimal randomized multilevel Monte Carlo for repeatedly nested expectations

Computation 2023-06-02 v3 Computational Finance Methodology Machine Learning

Abstract

The estimation of repeatedly nested expectations is a challenging task that arises in many real-world systems. However, existing methods generally suffer from high computational costs when the number of nestings becomes large. Fix any non-negative integer DD for the total number of nestings. Standard Monte Carlo methods typically cost at least O(ε(2+D))\mathcal{O}(\varepsilon^{-(2+D)}) and sometimes O(ε2(1+D))\mathcal{O}(\varepsilon^{-2(1+D)}) to obtain an estimator up to ε\varepsilon-error. More advanced methods, such as multilevel Monte Carlo, currently only exist for D=1D = 1. In this paper, we propose a novel Monte Carlo estimator called READ\mathsf{READ}, which stands for "Recursive Estimator for Arbitrary Depth.'' Our estimator has an optimal computational cost of O(ε2)\mathcal{O}(\varepsilon^{-2}) for every fixed DD under suitable assumptions, and a nearly optimal computational cost of O(ε2(1+δ))\mathcal{O}(\varepsilon^{-2(1 + \delta)}) for any 0<δ<120 < \delta < \frac12 under much more general assumptions. Our estimator is also unbiased, which makes it easy to parallelize. The key ingredients in our construction are an observation of the problem's recursive structure and the recursive use of the randomized multilevel Monte Carlo method.

Keywords

Cite

@article{arxiv.2301.04095,
  title  = {Optimal randomized multilevel Monte Carlo for repeatedly nested expectations},
  author = {Yasa Syed and Guanyang Wang},
  journal= {arXiv preprint arXiv:2301.04095},
  year   = {2023}
}

Comments

Accepted by ICML 2023. This version generalizes Thm 2.2 and 2.4 to multivariate underlying process, adds two numerical experiments, adds several references, and corrects several typos

R2 v1 2026-06-28T08:08:43.591Z