G05XEF (PDF version)
G05 Chapter Contents
G05 Chapter Introduction
NAG Library Manual

NAG Library Routine Document


Note:  before using this routine, please read the Users' Note for your implementation to check the interpretation of bold italicised terms and other implementation-dependent details.

+ Contents

    1  Purpose
    7  Accuracy

1  Purpose

G05XEF takes a set of input times and permutes them to specify one of several predefined Brownian bridge construction orders. The permuted times can be passed to G05XAF or G05XCF to initialize the Brownian bridge generators with the chosen bridge construction order.

2  Specification


3  Description

The Brownian bridge algorithm (see Glasserman (2004)) is a popular method for constructing a Wiener process at a set of discrete times, t0 < t1 < t2 < ,, < tN < T , for N1. To ease notation we assume that T has the index N+1 so that T=tN+1. Inherent in the algorithm is the notion of a bridge construction order which specifies the order in which the N+2 points of the Weiner process, Xt0,XT and Xti, for i=1,2,,N, are generated. The value of Xt0 is always assumed known, and the first point to be generated is always the final time XT. Thereafter, successive points are generated iteratively by an interpolation formula, using points which were computed at previous iterations. In many cases the bridge construction order is not important, since any construction order will yield a correct process. However, in certain cases, for example when using quasi-random variates to construct the sample paths, the bridge construction order can be important.

3.1  Supported Bridge Construction Orders

G05XEF accepts as input an array of time points t1 , t2 ,, tN , T  at which the Wiener process is to be sampled. These time points are then permuted to construct the bridge. In all of the supported construction orders the first construction point is T which has index N+1. The remaining points are constructed by iteratively bisecting (sub-intervals of) the time indices interval 0,N+1 , as Figure 1 illustrates:
Figure 1
Figure 1
The time indices interval is processed in levels Li, for i=1,2,. Each level Li contains ni points L1i,,Lnii where ni2i-1. The number of points at each level depends on the value of N. The points Lji for i1 and j=1,2,ni are computed as follows: define L00=N+1 and set
Lji = J+ K-J/2 where J= max Lkp : 1knp , ​ 0p<i ​ and ​ Lkp < Lji ​ and ​ K = min Lkp : 1knp , ​ 0p<i ​ and ​ Lkp > Lji
By convention the maximum of the empty set is taken to be to be zero. Figure 1 illustrates the algorithm when N+1 is a power of two. When N+1 is not a power of two, one must decide how to round the divisions by 2. For example, if one rounds down to the nearest integer, then one could get the following:
Figure 2
Figure 2
From the series of bisections outlined above, two ways of ordering the time indices Lji are supported. In both cases, levels are always processed from coarsest to finest (i.e., increasing i). Within a level, the time indices can either be processed left to right (i.e., increasing j) or right to left (i.e., decreasing j). For example, when processing left to right, the sequence of time indices could be generated as:
N+1 L11 L12 L22 L13 L23 L33 L43
while when processing right to left, the same sequence would be generated as:
N+1 L11 L22 L12 L43 L33 L23 L13
G05XEF therefore offers four bridge construction methods; processing either left to right or right to left, with rounding either up or down. Which method is used is controlled by the BGORD parameter. For example, on the set of times
t1 t2 t3 t4 t5 t6 t7 t8 t9 t10 t11 t12 T
the Brownian bridge would be constructed in the following orders:
BGORD=1 (processing left to right, rounding down)
T t6 t3 t9 t1 t4 t7 t11 t2 t5 t8 t10 t12
BGORD=2 (processing left to right, rounding up)
T t7 t4 t10 t2 t6 t9 t12 t1 t3 t5 t8 t11
BGORD=3 (processing right to left, rounding down)
T t6 t9 t3 t11 t7 t4 t1 t12 t10 t8 t5 t2
BGORD=4 (processing right to left, rounding up)
T t7 t10 t4 t12 t9 t6 t2 t11 t8 t5 t3 t1 .
The four construction methods described above can be further customized through the use of the input array MOVE. To see the effect of this parameter, suppose that an array A holds the output of G05XEF when NMOVE=0 (i.e., the unmodified bridge construction order as specified by BGORD). Let
B = tj : j=MOVEi, i=1,2,,NMOVE
be the array of all times identified by MOVE, and let C be the array A with all the elements in B removed, i.e.,
C = Ai : Ai Bi , i=1,2,,NTIMES , j=1,2,,NMOVE .
Then the output of G05XEF when NMOVE>0 is given by
When the Brownian bridge is used with quasi-random variates, this functionality can be used to allow specific sections of the bridge to be constructed using the lowest dimensions of the quasi-random points.

4  References

Glasserman P (2004) Monte Carlo Methods in Financial Engineering Springer

5  Parameters

1:     BGORD – INTEGERInput
On entry: the bridge construction order to use.
Constraint: BGORD=1, 2, 3 or 4.
2:     T0 – REAL (KIND=nag_wp)Input
On entry: t0, the start value of the time interval on which the Wiener process is to be constructed.
3:     TEND – REAL (KIND=nag_wp)Input
On entry: T, the largest time at which the Wiener process is to be constructed.
4:     NTIMES – INTEGERInput
On entry: N, the number of time points in the Weiner process, excluding t0 and T.
Constraint: NTIMES1.
5:     INTIME(NTIMES) – REAL (KIND=nag_wp) arrayInput
On entry: the time points, t1,t2,,tN, at which the Wiener process is to be constructed. Note that the final time T is not included in this array.
  • T0<INTIMEi and INTIMEi<INTIMEi+1, for i=1,2,,NTIMES-1;
6:     NMOVE – INTEGERInput
On entry: the number of elements in the array MOVE.
Constraint: 0NMOVENTIMES.
7:     MOVE(NMOVE) – INTEGER arrayInput
On entry: the indices of the entries in INTIME which should be moved to the front of the TIMES array, with MOVEj=i setting the jth element of TIMES to ti. Note that i ranges from 1 to NTIMES. When NMOVE=0, MOVE is not referenced.
Constraint: 1MOVEjNTIMES, for j=1,2,,NMOVE.
The elements of MOVE must be unique.
8:     TIMES(NTIMES) – REAL (KIND=nag_wp) arrayOutput
On exit: the output bridge construction order. This should be passed to G05XAF or G05XCF.
9:     IFAIL – INTEGERInput/Output
On entry: IFAIL must be set to 0, -1​ or ​1. If you are unfamiliar with this parameter you should refer to Section 3.3 in the Essential Introduction for details.
For environments where it might be inappropriate to halt program execution when an error is detected, the value -1​ or ​1 is recommended. If the output of error messages is undesirable, then the value 1 is recommended. Otherwise, if you are not familiar with this parameter, the recommended value is 0. When the value -1​ or ​1 is used it is essential to test the value of IFAIL on exit.
On exit: IFAIL=0 unless the routine detects an error or a warning has been flagged (see Section 6).

6  Error Indicators and Warnings

If on entry IFAIL=0 or -1, explanatory error messages are output on the current error message unit (as defined by X04AAF).
Errors or warnings detected by the routine:
On entry, BGORD=value.
Constraint: BGORD=1, 2, 3 or 4 
On entry, NTIMES=value.
Constraint: NTIMES1.
On entry, NMOVE=value and NTIMES=value.
Constraint: 0NMOVENTIMES.
On entry, INTIMEvalue=value and INTIMEvalue=value.
Constraint: the elements in INTIME must be in increasing order.
On entry, INTIME1=value and T0=value.
Constraint: INTIME1>T0.
On entry, NTIMES=value, INTIMENTIMES=value and TEND=value.
On entry, MOVEvalue=value.
Constraint: MOVEi1 for all i.
On entry, MOVEvalue=value and NTIMES=value.
Constraint: MOVEiNTIMES for all i.
On entry, MOVEi=MOVEj=value for i=value and j=value.
Constraint: all elements in MOVE must be unique.

7  Accuracy

Not applicable.

8  Further Comments


9  Example

This example calls G05XEF, G05XAF and G05XBF to generate two sample paths of a three dimensional free Wiener process. The array MOVE is used to ensure that a certain part of the sample path is always constructed using the lowest dimensions of the input quasi-random points. For further details on using quasi-random points with the Brownian bridge algorithm, please see Section 2.6 in the G05 Chapter Introduction.

9.1  Program Text

Program Text (g05xefe.f90)

9.2  Program Data


9.3  Program Results

Program Results (g05xefe.r)

G05XEF (PDF version)
G05 Chapter Contents
G05 Chapter Introduction
NAG Library Manual

© The Numerical Algorithms Group Ltd, Oxford, UK. 2012