Nonnegativity preserving convolution kernels. Application to Stochastic Volterra Equations in closed convex domains and their approximation

Paper: arXiv 2302.07758

Authors: Aurélien Alfonsi

Abstract

This work defines and studies one-dimensional convolution kernels that preserve nonnegativity. When the past dynamics of a process is integrated with a convolution kernel like in Stochastic Volterra Equations or in the jump intensity of Hawkes processes, this property allows to get the nonnegativity of the integral. We give characterizations of these kernels and show in particular that completely monotone kernels preserve nonnegativity. We then apply these results to analyze the stochastic invariance of a closed convex set by Stochastic Volterra Equations. We also get a comparison result in dimension one. Last, when the kernel is a positive linear combination of decaying exponential functions, we present a second order approximation scheme for the weak error that stays in the closed convex domain under suitable assumptions. We apply these results to the rough Heston model and give numerical illustrations.

Complexity vs Empirical Score

• Math Complexity: 0.0/10
• Empirical Rigor: 0.0/10
• Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: Scoring failed: Could not find valid JSON in LLM response: line 1 column 1 (char 0)

Research Flowchart

  flowchart TD
    A[Research Goal: Analyze SVEs in closed convex domains & develop nonnegativity-preserving schemes] --> B[Characterize Nonnegativity-Preserving Convolution Kernels]
    B --> C[Prove Completely Monotone Kernels Preserve Nonnegativity]
    C --> D[Inputs: Rough Heston Model & Exp-Sum Kernels]
    D --> E[Establish Stochastic Invariance & 1D Comparison Results]
    E --> F[Construct 2nd-Order Weak Error Approximation Scheme]
    F --> G[Outcomes: Domain-Preserving Numerical Scheme & Validated Rough Heston Simulations]