Financial Engineering Workshops - Kees Oosterlee (Utrecht University)

Abstract:
Automated code generation is finding increasing application in quantitative finance, where large language models can generate option pricing implementations directly from mathematical model specifications. Validating such implementations, however, requires more than standard unit tests: numerical pricing methods must remain mathematically consistent, numerically stable, and robust across a wide range of model parameters.
We present RIDGE, an autonomous validation methodology in which generated pricing implementations are subjected to structured no-arbitrage checks, stress tests, benchmark comparisons, and consistency inspections. Diagnostic knowledge accumulated during the validation process is stored and reused across models and validation cycles, enabling systematic improvement of both the pricing implementation and the validation methodology itself.
Applied to five stochastic volatility models, the methodology eliminates all detected implementation defects and, in two cases, leads to new semi-analytic pricing constructions.
Focus will however be on numerical mathematics aspects.
Joint work with: Liexin Cheng (Peking University),  Shuaiqiang Liu (TU Delft)


Bio: Cornelis (Kees) Oosterlee is Professor of Financial Mathematics and Head of the Mathematical Institute at Utrecht University. His research lies at the interface of numerical mathematics, scientific computing and computational finance, with particular interests in stochastic differential equations, Fourier-based methods, machine learning, and efficient numerical techniques for pricing and risk management. A recurring theme in his work is the development of mathematically well-founded methods that remain practical for large-scale financial applications. He is co-author of the books Multigrid and Mathematical Modeling and Computation in Finance, and his research is widely cited internationally.
 

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