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AN IMPROVEMENT OF MARKOVIAN INTEGRATION BY PARTS FORMULA AND APPLICATION TO SENSITIVITY COMPUTATION

Published online by Cambridge University Press:  05 January 2021

Yue Liu Open the ORCID record for Yue Liu [Opens in a new window] ,
Zhiyan Shi Open the ORCID record for Zhiyan Shi [Opens in a new window] ,
Ying Tang ,
Jingjing Yao  and
Xincheng Zhu
Yue Liu
Affiliation:
School of Geography, Nanjing Normal University, Nanjing, Jiangsu, China School of Finance and Economics, Jiangsu University, Zhenjiang, Jiangsu, China
Zhiyan Shi
Affiliation:
School of Mathematical Science, Jiangsu University, Zhenjiang, Jiangsu, China E-mail: shizhiyan1984@126.com
Ying Tang
Affiliation:
School of Mathematical Science, Jiangsu University, Zhenjiang, Jiangsu, China E-mail: shizhiyan1984@126.com
Jingjing Yao
Affiliation:
School of Finance and Economics, Jiangsu University, Zhenjiang, Jiangsu, China
Xincheng Zhu
Affiliation:
Department of Computer and Mathematics, Arcadia University, Glenside, Pennsylvania19038, USA School of Mathematical Science, Jiangsu University, Zhenjiang, Jiangsu, China
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Abstract

This paper establishes a new version of integration by parts formula of Markov chains for sensitivity computation, under much lower restrictions than the existing researches. Our approach is more fundamental and applicable without using Girsanov theorem or Malliavin calculus as did by past papers. Numerically, we apply this formula to compute sensitivity regarding the transition rate matrix and compare with a recent research by an IPA (infinitesimal perturbation analysis) method and other approaches.

Keywords

integration by parts formulaMarkov chainssensitivity computation
Type
Research Article
Information
Probability in the Engineering and Informational Sciences , Volume 36 , Issue 2 , April 2022 , pp. 357 - 377
Copyright
Copyright © The Author(s), 2020. Published by Cambridge University Press

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