An algorithm (CoDeFi) for the curse of dimensionality in finance

Philippe G. LeFloch, Jean-Marc Mercier

Published 2016-06-30Version 1

We present a new algorithm (CoDeFi) to tackle the Curse Of Dimensionality In Finance and deal with a broad class of partial differential equations including the Kolmogorov equations as, for instance, the Black and Scholes equations. As a main feature, our method allows us to solve the Kolmogorov equation in high dimensions and provides a very general framework to deal with risk measurements. In financial applications, the number of spatial dimensions corresponds to the number of underlyings or risk sources and it is essential to cover high dimensions.