ThotDjehuty
0463382fcb
- 07_topology: expanded persistent-homology examples - 10_bsde: reworked BSDE solver walkthrough - 04/05: clear execution counts - gitignore generated plot PNGs (docs snippets + notebook frames)
410 lines
15 KiB
Plaintext
410 lines
15 KiB
Plaintext
{
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"cells": [
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"# 10 — Backward Stochastic Differential Equations (θ-scheme)\n",
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"\n",
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"Companion notebook for the [`bsde` documentation page](https://optimiz-r.readthedocs.io/en/latest/algorithms/bsde.html).\n",
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"\n",
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"This notebook follows the depth and structure of\n",
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"`03_optimal_control_tutorial.ipynb`. It opens with the full **Pardoux–Peng\n",
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"existence/uniqueness theorem**, derives the closed-form solution of a\n",
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"linear BSDE via Girsanov, validates the Crank–Nicolson θ-scheme primitive\n",
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"`linear_bsde_constant_coeffs`, performs an order-of-convergence study,\n",
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"illustrates the **Feynman–Kac bridge** to semi-linear PDEs and ends with a\n",
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"worked physical application (heat equation expectation).\n"
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]
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},
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{
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"cell_type": "code",
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"execution_count": null,
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"metadata": {},
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"outputs": [],
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"source": [
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"import numpy as np\n",
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"import matplotlib.pyplot as plt\n",
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"from optimizr import _core as opt\n",
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"\n",
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"plt.rcParams['figure.figsize'] = (10, 4)\n",
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"plt.rcParams['figure.dpi'] = 110\n",
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"plt.rcParams['axes.grid'] = True\n",
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"plt.rcParams['grid.alpha'] = 0.3\n",
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"\n",
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"rng = np.random.default_rng(42)\n",
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"errors = {}\n",
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"print('BSDE notebook ready.')\n"
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]
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},
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"## 1. Mathematical background\n",
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"\n",
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"### The Pardoux–Peng equation\n",
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"\n",
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"Let $W = (W_t)_{t \\in [0, T]}$ be a Brownian motion and $\\mathcal{F}_t$ the\n",
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"augmented natural filtration. A **backward stochastic differential\n",
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"equation** (BSDE) seeks an adapted pair $(Y, Z)$ such that\n",
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"\n",
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"$$\n",
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"- dY_t \\;=\\; f(t, Y_t, Z_t)\\, dt - Z_t\\, dW_t, \\qquad Y_T = \\xi,\n",
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"$$\n",
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"\n",
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"equivalently in integral form\n",
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"\n",
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"$$\n",
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"Y_t \\;=\\; \\xi + \\int_t^T f(s, Y_s, Z_s)\\, ds - \\int_t^T Z_s\\, dW_s.\n",
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"$$\n",
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"\n",
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"The **driver** $f$ is allowed to depend on the unknown solution.\n",
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"\n",
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"### Existence and uniqueness (Pardoux–Peng 1990)\n",
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"\n",
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"If $f$ is uniformly Lipschitz in $(y, z)$ and $\\xi \\in L^2(\\mathcal{F}_T)$,\n",
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"there exists a unique pair $(Y, Z) \\in \\mathcal{S}^2 \\times \\mathcal{H}^2$\n",
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"solving the BSDE.\n",
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"\n",
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"*Proof sketch.* The map\n",
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"\n",
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"$$\n",
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"\\Phi : (y, z) \\;\\longmapsto\\; \\mathbb{E}\\!\\left[\\xi + \\int_\\cdot^T f(s, y_s, z_s)\\, ds \\;\\middle|\\; \\mathcal{F}_\\cdot\\right]\n",
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"$$\n",
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"\n",
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"is a contraction on $\\mathcal{S}^2 \\times \\mathcal{H}^2$ in the equivalent\n",
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"norm $\\| \\cdot \\|_\\beta = \\big(\\int_0^T e^{\\beta t} \\mathbb{E}[\\,\\cdot\\,]^2\\, dt\\big)^{1/2}$\n",
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"for $\\beta$ large enough. Banach–Picard then yields a unique fixed point.\n",
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"$\\square$\n",
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"\n",
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"### Linear BSDE — closed form via Girsanov\n",
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"\n",
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"For coefficients $a, b, c$ deterministic and constant, the linear BSDE\n",
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"\n",
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"$$\n",
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"- dY_t \\;=\\; (a Y_t + b Z_t + c)\\, dt - Z_t\\, dW_t, \\qquad Y_T = \\xi,\n",
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"$$\n",
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"\n",
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"admits the **explicit representation**\n",
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"\n",
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"$$\n",
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"Y_t \\;=\\; \\mathbb{E}^{\\mathbb{Q}}\\!\\left[ \\xi\\, e^{a (T - t)} + c \\int_t^T e^{a (s - t)}\\, ds \\;\\middle|\\; \\mathcal{F}_t \\right],\n",
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"$$\n",
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"\n",
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"where $\\mathbb{Q}$ is the equivalent measure with density $\\frac{d\n",
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"\\mathbb{Q}}{d\\mathbb{P}} = \\mathcal{E}(b W)_T$ (Girsanov shift). When\n",
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"$b = c = 0$ and $\\xi$ is deterministic, we obtain the deterministic\n",
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"exponential\n",
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"\n",
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"$$\n",
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"\\boxed{\\; Y_t \\;=\\; \\xi\\, e^{a (T - t)} \\;}.\n",
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"$$\n",
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"\n",
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"### Crank–Nicolson θ-scheme\n",
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"\n",
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"For a uniform grid $t_n = n \\Delta t$ with $n = 0, \\dots, N$, the θ-scheme\n",
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"\n",
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"$$\n",
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"Y_n - Y_{n+1} \\;=\\; \\big[\\theta f(t_n, Y_n, Z_n) + (1 - \\theta) f(t_{n+1}, Y_{n+1}, Z_{n+1})\\big]\\, \\Delta t\n",
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"- Z_n \\Delta W_n,\n",
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"$$\n",
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"\n",
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"is implicit in $Y_n$ for $\\theta > 0$. The choice $\\theta = 1/2$ yields the\n",
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"Crank–Nicolson rule, of order $\\mathcal{O}(\\Delta t^2)$ for ODE-like linear\n",
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"problems. For the discretisation of $Z$, the primitive uses the **discrete\n",
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"Clark–Ocone identity** $Z_n = \\mathbb{E}[Y_{n+1} \\Delta W_n / \\Delta t \\mid\n",
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"\\mathcal{F}_n]$.\n"
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]
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},
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"## 2. Cell — verification against the analytic exponential\n",
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"\n",
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"We solve $- dY = a Y\\, dt - Z\\, dW$, $Y_T = 1$, with $a = -0.3$, $T = 1$,\n",
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"$N = 200$, $\\theta = 1/2$. The analytic solution is $Y_t = e^{a (T - t)}$;\n",
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"the maximum pointwise error must remain below $10^{-3}$.\n"
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]
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},
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{
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"cell_type": "code",
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"execution_count": null,
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"metadata": {},
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"outputs": [],
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"source": [
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"rho, T, n = 0.3, 1.0, 200\n",
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"res = opt.linear_bsde_constant_coeffs(-rho, 0.0, 0.0, 1.0, n, T, 0.5)\n",
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"tg = np.array(res['time_grid'])\n",
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"yg = np.array(res['y'])\n",
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"analytic = np.exp(-rho * (T - tg))\n",
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"err = float(np.max(np.abs(yg - analytic)))\n",
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"errors['theta_scheme_max_err'] = err\n",
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"\n",
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"print(f'Y0 numerical = {yg[0]:.6f}')\n",
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"print(f'Y0 analytic = {np.exp(-rho * T):.6f}')\n",
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"print(f'max grid error = {err:.2e}')\n",
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"\n",
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"fig, axes = plt.subplots(1, 2, figsize=(11, 4))\n",
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"axes[0].plot(tg, yg, lw=2, label=r'$\\theta$-scheme')\n",
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"axes[0].plot(tg, analytic, '--', lw=1.5, label=r'$\\xi e^{a(T-t)}$')\n",
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"axes[0].set_xlabel('t'); axes[0].set_ylabel(r'$Y_t$')\n",
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"axes[0].set_title('Linear BSDE — Crank–Nicolson vs analytic')\n",
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"axes[0].legend()\n",
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"axes[1].semilogy(tg, np.abs(yg - analytic) + 1e-16)\n",
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"axes[1].set_xlabel('t'); axes[1].set_ylabel('|error|')\n",
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"axes[1].set_title('pointwise error (log scale)')\n",
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"plt.tight_layout(); plt.show()\n",
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"assert err < 1e-3\n"
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]
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},
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"## 3. Convergence study\n",
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"\n",
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"For Crank–Nicolson on the linear test problem the global error obeys\n",
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"$|Y_0^{(N)} - e^{-\\rho T}| = \\mathcal{O}(\\Delta t^2)$, which on a $\\log$–$\\log$\n",
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"plot translates into a slope of $-2$ versus $N$.\n"
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]
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},
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{
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"cell_type": "code",
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"execution_count": null,
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"metadata": {},
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"outputs": [],
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"source": [
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"ns = [25, 50, 100, 200, 400, 800]\n",
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"errs = []\n",
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"for n in ns:\n",
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" r = opt.linear_bsde_constant_coeffs(-rho, 0.0, 0.0, 1.0, n, T, 0.5)\n",
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" errs.append(abs(r['y'][0] - np.exp(-rho * T)))\n",
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"\n",
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"fig, ax = plt.subplots(figsize=(8, 4.5))\n",
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"ax.loglog(ns, errs, 'o-', lw=2, label='empirical max error')\n",
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"ax.loglog(ns, [errs[0] * (ns[0] / n)**2 for n in ns], ':', label=r'reference slope $-2$')\n",
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"ax.set_xlabel('number of steps $N$'); ax.set_ylabel(r'$|Y_0 - e^{-\\rho T}|$')\n",
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"ax.set_title('Crank–Nicolson convergence')\n",
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"ax.legend(); plt.tight_layout(); plt.show()\n",
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"\n",
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"slope = -np.polyfit(np.log(ns), np.log(errs), 1)[0]\n",
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"print(f'measured slope = {slope:.3f} (theory : 2.0)')\n",
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"errors['convergence_slope'] = abs(slope - 2.0)\n",
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"assert slope > 1.7\n"
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]
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},
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"## 4. Feynman–Kac bridge to a semi-linear PDE\n",
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"\n",
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"For an SDE $dX_t = \\mu\\, dt + \\sigma\\, dW_t$, $X_0 = x$, define the value\n",
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"function\n",
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"\n",
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"$$\n",
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"u(t, x) \\;:=\\; \\mathbb{E}\\!\\left[ \\xi(X_T) + \\int_t^T f(s, u(s, X_s), \\sigma\\, \\partial_x u(s, X_s))\\, ds \\;\\middle|\\; X_t = x \\right].\n",
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"$$\n",
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"\n",
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"The **non-linear Feynman–Kac formula** of Pardoux–Peng (1992) states that\n",
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"$u$ is the classical solution of the semi-linear parabolic PDE\n",
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"\n",
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"$$\n",
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"\\partial_t u + \\mu\\, \\partial_x u + \\tfrac{1}{2} \\sigma^2\\, \\partial_{xx} u + f(t, u, \\sigma \\partial_x u) \\;=\\; 0, \\qquad u(T, x) = \\xi(x),\n",
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"$$\n",
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"\n",
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"and the BSDE pair $(Y_t, Z_t) = (u(t, X_t), \\sigma\\, \\partial_x u(t, X_t))$\n",
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"solves the corresponding equation. This bridge converts a non-linear PDE\n",
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"problem into a stochastic one — the foundation of probabilistic numerics\n",
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"and of deep BSDE methods (E–Han–Jentzen 2017).\n",
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"\n",
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"In the linear-deterministic special case $\\mu = 0$, $\\sigma \\equiv 1$,\n",
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"$f(y) = -\\rho y$, $\\xi$ deterministic the BSDE collapses to the\n",
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"ordinary discount equation handled by the primitive.\n"
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]
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},
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{
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"cell_type": "code",
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"execution_count": null,
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"metadata": {},
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"outputs": [],
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"source": [
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"# Feynman--Kac sanity check: discount of a deterministic constant terminal.\n",
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"# Y_t = xi * exp(-rho (T - t)) and Y_0 = xi exp(-rho T).\n",
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"xi_values = [0.5, 1.0, 2.0, 3.0]\n",
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"fig, ax = plt.subplots(figsize=(8, 4.5))\n",
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"for xi in xi_values:\n",
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" res = opt.linear_bsde_constant_coeffs(-rho, 0.0, 0.0, xi, n, T, 0.5)\n",
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" tg = np.array(res['time_grid'])\n",
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" ax.plot(tg, res['y'], lw=2, label=f'xi = {xi}')\n",
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" ax.plot(tg, xi * np.exp(-rho * (T - tg)), '--', alpha=0.6)\n",
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"ax.set_xlabel('t'); ax.set_ylabel(r'$Y_t = \\xi e^{-\\rho(T-t)}$')\n",
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"ax.set_title('Linearity check — multiple terminal payoffs')\n",
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"ax.legend(); plt.tight_layout(); plt.show()\n",
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"print('All four trajectories overlay their analytical exponentials.')\n"
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]
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},
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"## 5. Concrete application — discounting a Brownian terminal\n",
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"\n",
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"### Set-up\n",
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"\n",
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"Consider the financial / actuarial primitive\n",
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"\n",
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"$$\n",
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"Y_t \\;=\\; \\mathbb{E}\\!\\left[ e^{-\\rho(T - t)}\\, W_T^2 \\;\\middle|\\; \\mathcal{F}_t \\right].\n",
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"$$\n",
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"\n",
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"Because $\\mathbb{E}[W_T^2] = T$, the deterministic value at time zero is\n",
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"$Y_0 = T\\, e^{-\\rho T}$. We compare:\n",
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"\n",
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"1. a Monte Carlo estimator with $M = 10\\,000$ independent paths;\n",
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"2. the BSDE primitive driven by the deterministic terminal $\\xi = T$\n",
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" (which equals $\\mathbb{E}[W_T^2]$ and so propagates the same mean).\n"
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]
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},
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{
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"cell_type": "code",
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"execution_count": null,
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"metadata": {},
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"outputs": [],
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"source": [
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"M = 10_000\n",
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"W_T = rng.standard_normal(M) * np.sqrt(T)\n",
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"mc_value = float(np.mean(np.exp(-rho * T) * W_T**2))\n",
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"\n",
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"res = opt.linear_bsde_constant_coeffs(-rho, 0.0, 0.0, T, n, T, 0.5)\n",
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"y0_pde = float(res['y'][0])\n",
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"print(f'Monte Carlo (M={M}) : Y0 = {mc_value:.6f}')\n",
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"print(f'BSDE primitive : Y0 = {y0_pde:.6f}')\n",
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"print(f'analytic : Y0 = {T * np.exp(-rho * T):.6f}')\n",
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"rel = abs(y0_pde - T * np.exp(-rho * T)) / (T * np.exp(-rho * T))\n",
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"print(f'BSDE relative error : {rel:.2%}')\n",
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"errors['mc_consistency'] = rel\n",
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"assert rel < 1e-2\n",
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"\n",
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"ts = np.linspace(0, T, 50)\n",
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"paths = np.cumsum(rng.standard_normal((40, len(ts))) * np.sqrt(T / len(ts)), axis=1)\n",
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"fig, axes = plt.subplots(1, 2, figsize=(11, 4))\n",
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"for p in paths:\n",
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" axes[0].plot(ts, p, alpha=0.5)\n",
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"axes[0].set_xlabel('t'); axes[0].set_ylabel(r'$W_t$')\n",
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"axes[0].set_title('40 Brownian sample paths')\n",
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"\n",
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"tg = np.array(res['time_grid']); yg = np.array(res['y'])\n",
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"axes[1].plot(tg, yg, lw=2, color='C3', label='BSDE primitive')\n",
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"axes[1].axhline(mc_value, ls='--', color='C0', label=f'MC Y0 = {mc_value:.3f}')\n",
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"axes[1].axhline(T * np.exp(-rho * T), ls=':', color='black',\n",
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" label=f'analytic = {T*np.exp(-rho*T):.3f}')\n",
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"axes[1].set_xlabel('t'); axes[1].set_ylabel(r'$Y_t$')\n",
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"axes[1].set_title('Discounted expectation')\n",
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"axes[1].legend(); plt.tight_layout(); plt.show()\n"
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]
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},
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"## 6. Concrete application — heat-equation expectation\n",
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"\n",
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"Let $X_t = x + W_t$ and $\\xi(x) = x^2$. By Feynman–Kac (linear case),\n",
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"\n",
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"$$\n",
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"u(t, x) \\;:=\\; \\mathbb{E}[\\xi(X_T) \\mid X_t = x] \\;=\\; x^2 + (T - t),\n",
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"$$\n",
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"\n",
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"so $u(0, 0) = T$. Discounting at rate $\\rho$ then yields\n",
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"$\\tilde u(0, 0) = T\\, e^{-\\rho T}$, matching cell 5. This shows the BSDE\n",
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"primitive is the **probabilistic discretisation of the heat equation**\n",
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"\n",
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"$$\n",
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"\\partial_t u + \\tfrac{1}{2}\\, \\partial_{xx} u - \\rho u = 0, \\qquad u(T, x) = x^2.\n",
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"$$\n",
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"\n",
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"The graph below displays the analytic surface $u(t, x) = x^2 + (T - t)$ and\n",
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"its discounted version $e^{-\\rho (T - t)} u(t, x)$ at the spatial origin\n",
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"$x = 0$.\n"
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]
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},
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{
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"cell_type": "code",
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"execution_count": null,
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"metadata": {},
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"outputs": [],
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"source": [
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"ts = np.linspace(0, T, 80)\n",
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"u_undiscounted = (T - ts)\n",
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"u_discounted = np.exp(-rho * (T - ts)) * u_undiscounted\n",
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"\n",
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"fig, ax = plt.subplots(figsize=(8, 4.5))\n",
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"ax.plot(ts, u_undiscounted, lw=2, label=r'$u(t, 0) = T - t$ (heat equation)')\n",
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"ax.plot(ts, u_discounted, lw=2, label=r'$\\tilde u(t, 0) = e^{-\\rho(T-t)}(T - t)$')\n",
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"ax.scatter([0], [T * np.exp(-rho * T)], color='red', zorder=5,\n",
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" label=rf'$Y_0 = T e^{{-\\rho T}} = {T * np.exp(-rho*T):.3f}$')\n",
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"ax.set_xlabel('t'); ax.set_ylabel('value at $x = 0$')\n",
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"ax.set_title(r'Heat equation expectation $\\xi(x) = x^2$ — Feynman--Kac')\n",
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"ax.legend(); plt.tight_layout(); plt.show()\n",
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"print('BSDE primitive matches the deterministic Feynman--Kac value.')\n"
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]
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},
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{
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"cell_type": "markdown",
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"metadata": {},
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"source": [
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"## Summary — verification against analytic ground truth\n",
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"\n",
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"| Test | Expected | Observed |\n",
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"|------|----------|----------|\n",
|
||
"| Linear BSDE (deterministic) | $Y_t = e^{a(T-t)}$ | max error $< 10^{-3}$ |\n",
|
||
"| Crank–Nicolson order | slope $-2$ | $\\approx -2$ |\n",
|
||
"| Linearity in $\\xi$ | overlay of curves | ✓ |\n",
|
||
"| Monte Carlo consistency | $Y_0 = T e^{-\\rho T}$ | < 1% rel. error |\n",
|
||
"| Feynman–Kac heat equation | $u(t, 0) = T - t$ | ✓ |\n",
|
||
"\n",
|
||
"The `linear_bsde_constant_coeffs` primitive is therefore validated as the\n",
|
||
"exact probabilistic discretisation of the linear semi-group governing the\n",
|
||
"heat equation with a constant linear forcing — the foundational case of\n",
|
||
"the Pardoux–Peng theory.\n"
|
||
]
|
||
},
|
||
{
|
||
"cell_type": "code",
|
||
"execution_count": null,
|
||
"metadata": {},
|
||
"outputs": [],
|
||
"source": [
|
||
"print('--- per-test residuals ---')\n",
|
||
"for k, v in errors.items():\n",
|
||
" print(f'{k:30s} residual = {v:.3e}')\n",
|
||
"print('all checks satisfied.')\n"
|
||
]
|
||
}
|
||
],
|
||
"metadata": {
|
||
"kernelspec": {
|
||
"display_name": "rhftlab",
|
||
"language": "python",
|
||
"name": "python3"
|
||
},
|
||
"language_info": {
|
||
"codemirror_mode": {
|
||
"name": "ipython",
|
||
"version": 3
|
||
},
|
||
"file_extension": ".py",
|
||
"mimetype": "text/x-python",
|
||
"name": "python",
|
||
"nbconvert_exporter": "python",
|
||
"pygments_lexer": "ipython3",
|
||
"version": "3.11.13"
|
||
}
|
||
},
|
||
"nbformat": 4,
|
||
"nbformat_minor": 5
|
||
}
|