Physical phenomena are observed in many fields (science and engineering) and are often studied by time-consuming computer codes. These codes are analyzed with statistical models, often called emulators. In many situations, the physical system (computer model output) may be known to satisfy inequality constraints with respect to some or all input variables. Our aim is to build a model capable of incorporating both data interpolation and inequality constraints into a Gaussian process emulator. By using a functional decomposition, we propose a finite-dimensional approximation of Gaussian processes such that all conditional simulations satisfy the inequality constraints in the entire domain. The inequality mean and mode (i.e. mean and maximum a posteriori ) of the conditional Gaussian process are calculated and prediction intervals are quantified. To show the performance of the proposed model, some conditional simulations with inequality constraints such as boundedness, monotonicity or convexity conditions in one and two dimensions are given. A simulation study to investigate the efficiency of the method in terms of prediction and uncertainty quantification is included.Keywords Gaussian process emulator · inequality constraints · finite-dimensional approximation · uncertainty quantification · design and modeling of computer experiments 1 Introduction

Due to the lack of reliable market information, building financial term-structures may be associated with a significant degree of uncertainty. In this paper, we propose a new term-structure interpolation method that extends classical spline techniques by additionally allowing for quantification of uncertainty. The proposed method is based on a generalization of kriging models with linear equality constraints (market-fit conditions) and shape-preserving conditions such as monotonicity or positivity (no-arbitrage conditions). We define the most likely curve and show how to build confidence bands. The Gaussian process covariance hyper-parameters under the construction constraints are estimated using cross-validation techniques. Based on observed market quotes at different dates, we demonstrate the efficiency of the method by building curves together with confidence intervals for term-structures of OIS discount rates, of zero-coupon swaps rates and of CDS implied default probabilities. We also show how to construct interest-rate surfaces or default probability surfaces by considering time (quotation dates) as an additional dimension. JEL classification C63; E43; G12

To cite this version:Hassan Maatouk, Xavier Bay. A new rejection sampling method for truncated multivariate Gaussian random variables restricted to convex sets. Ronald Cools and Dirk Nuyens. Monte Carlo and QuasiMonte Carlo Methods , 163, pp.521-530, 2016, . A New Rejection Sampling Method for Truncated Multivariate Gaussian Random Variables Restricted to Convex SetsHassan Maatouk and Xavier Bay Abstract Statistical researchers have shown increasing interest in generating truncated multivariate normal distributions. In this paper, we only assume that the acceptance region is convex and we focus on rejection sampling. We propose a new algorithm that outperforms crude rejection method for the simulation of truncated multivariate Gaussian random variables. The proposed algorithm is based on a generalization of Von Neumann's rejection technique which requires the determination of the mode of the truncated multivariate density function. We provide a theoretical upper bound for the ratio of the target probability density function over the proposal probability density function. The simulation results show that the method is especially efficient when the probability of the multivariate normal distribution of being inside the acceptance region is low.

In this paper, we extend the correspondence between Bayes' estimation and optimal interpolation in a Reproducing Kernel Hilbert Space (RKHS) to the case of linear inequality constraints such as boundedness, monotonicity or convexity. In the unconstrained interpolation case, the mean of the posterior distribution of a Gaussian Process (GP) given data interpolation is known to be the optimal interpolation function minimizing the norm in the RKHS associated to the GP. In the constrained case, we prove that the Maximum A Posteriori (MAP) or Mode of the posterior distribution is the optimal constrained interpolation function in the RKHS. So, the general correspondence is achieved with the MAP estimator and not the mean of the posterior distribution. A numerical example is given to illustrate this last result.

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