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September 4, 2026
Time to Showcase Your Research: Applications Are Now Open for Student Research Paper Competition 2026
Taking part in the Student Research Paper Competition (SRPC) gives you an opportunity to present your research to experts, receive an independent assessment, and determine the future direction of your work. The competition is open to students graduating in 2026 not only from HSE University but from universities in Russia and abroad. Papers may be submitted in Russian and English, and in some fields also in French, German, and Spanish.
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Stochastic local volatility models and the Wei-Norman factorization method

Discrete and Continuous Dynamical Systems - Series S. 2022. Vol. 15. No. 12. P. 3699–3722.
Guerrero J., Orlando G.

In this paper, we show that a time-dependent local stochastic volatility (SLV) model can be reduced to a system of autonomous PDEs that can be solved using the heat kernel, by means of the Wei-Norman factorization method and Lie algebraic techniques. Then, we compare the results of traditional Monte Carlo simulations with the explicit solutions obtained by said techniques. This approach is new in the literature and, in addition to reducing a non-autonomous problem into an autonomous one, allows for shorter time in numerical computations.

Research target: Mathematics Economics and Management
Language: English
Full text
DOI
Keywords: Monte Carlo simulationsAffine Lie algebraStochastic Local VolatilityWei-Norman factorization
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