Stochastic Policy Gradient Methods in the Uncertain Volatility Model
Abstract
The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control problem is high-dimensional. We propose a backward actor-critic stochastic policy-gradient scheme tailored to this setting. The method combines a discrete dynamic programming principle with Proximal Policy Optimization and one-hidden-layer neural-network approximations of both the value function and the control policy. A key ingredient is the policy parameterization: continuous controls are represented through a squashed Gaussian policy built on a C-vine representation of correlation matrices, which enforces positive definiteness by construction. Beyond the robust price itself, the spatial gradient of the trained critic provides an approximation of the associated superhedging strategy. We assess the quality of this learned gradient through a dual formulation, which also yields a numerical dual estimate of the price. Numerical experiments on a range of multidimensional derivatives show that the method yields accurate prices, remains computationally efficient, and compares favorably with existing Monte Carlo and machine-learning-based benchmarks for robust pricing in the Uncertain Volatility Model.
Related
- (Cheap) Stochastic Policy Gradient Converges with High Probability for Linear Quadratic Regulator
- Parallel Policy-Gradient Methods for Parameter Optimization of Nonlinear Feedback Controllers
- Stochastic Gradient Methods with Online Scaling
- Restart and Adaptive Acceleration in Stochastic Gradient Methods
- A posteriori error bounds for the Uncertain Volatility Model
BibTeX
@misc{abbasturki2026stochastic,
title = {{Stochastic Policy Gradient Methods in the Uncertain Volatility Model}},
author = {Lokman A Abbas-Turki and Jean-François Chassagneux and Jean-Philippe Lemor and Grégoire Loeper and Simon Sananes},
howpublished = {arXiv},
year = {2026},
month = oct,
doi = {10.48550/arxiv.2605.06670},
eprint = {2605.06670},
archivePrefix = {arXiv},
url = {https://arxiv.org/abs/2605.06670},
}
RIS
TY - UNPB
TI - Stochastic Policy Gradient Methods in the Uncertain Volatility Model
AU - Lokman A Abbas-Turki
AU - Jean-François Chassagneux
AU - Jean-Philippe Lemor
AU - Grégoire Loeper
AU - Simon Sananes
PY - 2026
DA - 2026/10/09
PB - arXiv
DO - 10.48550/arxiv.2605.06670
UR - https://arxiv.org/abs/2605.06670
AB - The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control problem is high-dimensional. We propose a backward actor-critic stochastic policy-gradient scheme tailored to this setting. The method combines a discrete dynamic programming principle with Proximal Policy Optimization and one-hidden-layer neural-network approximations of both the value function and the control policy. A key ingredient is the policy parameterization: continuous controls are represented through a squashed Gaussian policy built on a C-vine representation of correlation matrices, which enforces positive definiteness by construction. Beyond the robust price itself, the spatial gradient of the trained critic provides an approximation of the associated superhedging strategy. We assess the quality of this learned gradient through a dual formulation, which also yields a numerical dual estimate of the price. Numerical experiments on a range of multidimensional derivatives show that the method yields accurate prices, remains computationally efficient, and compares favorably with existing Monte Carlo and machine-learning-based benchmarks for robust pricing in the Uncertain Volatility Model.
ER -