Stochastic Gradient Descent in Continuous Time

Stochastic gradient descent in continuous time (SGDCT) provides a computationally efficient method for the statistical learning of continuous-time models, which are widely used in science, engineering, and finance. The SGDCT algorithm follows a (noisy) descent direction along a continuous stream of data. SGDCT performs an online parameter update in continuous time with the parameter updates $\theta_t$ satisfying a stochastic differential equation. We prove that $\lim_{t \rightarrow \infty} \nabla \bar g(\theta_t) = 0$, where $\bar g$ is a natural objective function for the estimation of the continuous-time dynamics. The convergence proof leverages ergodicity by using an appropriate Poisson equation to help describe the evolution of the parameters for large times. For certain continuous-time problems, SGDCT has some promising advantages compared to a traditional stochastic gradient descent algorithm. This paper mainly focuses on applications in finance, such as model estimation for stocks, bonds, interest ...