Add Black-Scholes example with documentation

docs/demos/pinn_forward.rst

@@ -52,6 +52,7 @@ Time-dependent PDEs
    pinn_forward/burgers.rar
    pinn_forward/allen.cahn
    pinn_forward/klein.gordon
+   pinn_forward/black_scholes
 
 - `Beltrami flow <https://github.com/lululxvi/deepxde/blob/master/examples/pinn_forward/Beltrami_flow.py>`_
 - `Wave propagation with spatio-temporal multi-scale Fourier feature architecture <https://github.com/lululxvi/deepxde/blob/master/examples/pinn_forward/wave_1d.py>`_

docs/demos/pinn_forward/black_scholes.rst

@@ -0,0 +1,148 @@
+Black-Scholes Equation
+======================
+
+Problem Setup
+-------------
+
+We solve the Black-Scholes partial differential equation for pricing a European call option.
+The problem is formulated in terms of **time-to-maturity** :math:`\tau = T - t`.
+
+The PDE is given by:
+
+.. math::
+    \frac{\partial V}{\partial \tau} = \frac{1}{2}\sigma^2 S^2 \frac{\partial^2 V}{\partial S^2} + r S \frac{\partial V}{\partial S} - r V, \qquad S \in [0, S_{max}], \quad \tau \in [0, T]
+
+where:
+ - :math:`V(S, \tau)` is the option price
+ - :math:`S` is the underlying asset price
+ - :math:`\tau` is the time to maturity
+ - :math:`\sigma=0.2` is the volatility
+ - :math:`r=0.05` is the risk-free interest rate
+
+The boundary and initial conditions are:
+
+1. **Initial Condition** (at maturity :math:`\tau=0`):
+
+.. math:: V(S, 0) = \max(S - K, 0)
+
+where :math:`K=50` is the strike price.
+
+2. **Boundary Conditions**:
+
+.. math::
+    V(0, \tau) &= 0 \\
+    V(S_{max}, \tau) &= S_{max} - K e^{-r\tau}
+
+Implementation
+--------------
+
+This example uses a Physics-Informed Neural Network (PINN) to solve the equation.
+
+First, we import DeepXDE and define the problem parameters:
+
+.. code-block:: python
+
+    import deepxde as dde
+    import numpy as np
+    from scipy.stats import norm
+
+    K = 50.0      # Strike price
+    r = 0.05      # Risk-free rate
+    sigma = 0.2   # Volatility
+    T = 1.0       # Time to maturity
+    S_max = 150.0 # Maximum stock price
+
+We define the computational geometry. We use ``GeometryXTime`` to combine the asset price interval :math:`[0, 150]` and the time domain :math:`[0, 1]`:
+
+.. code-block:: python
+
+    geom = dde.geometry.Interval(0, S_max)
+    timedomain = dde.geometry.TimeDomain(0, T)
+    geomtime = dde.geometry.GeometryXTime(geom, timedomain)
+
+The PDE residual is defined below. Here ``x[:, 0]`` is the asset price
+:math:`S`, ``x[:, 1]`` is the time to maturity :math:`\tau`, and ``y``
+is the option price :math:`V(S, \tau)` output by the network.
+
+.. code-block:: python
+
+    def pde(x, y):
+        # x[:, 0]: asset price S
+        # x[:, 1]: time to maturity tau
+        # y:       option price V(S, tau)
+        S = x[:, 0:1]
+        dV_tau = dde.grad.jacobian(y, x, i=0, j=1)
+        dV_S   = dde.grad.jacobian(y, x, i=0, j=0)
+        dV_SS  = dde.grad.hessian(y, x, i=0, j=0)
+        return dV_tau - (0.5 * sigma**2 * S**2 * dV_SS + r * S * dV_S - r * y)
+
+For the boundary conditions, we define the payoff function at maturity (:math:`\tau=0`) and the Dirichlet conditions at :math:`S=0` and :math:`S=S_{max}`:
+
+.. code-block:: python
+
+    ic = dde.icbc.IC(
+        geomtime,
+        lambda x: np.maximum(x[:, 0:1] - K, 0.0),
+        lambda _, on_initial: on_initial,
+    )
+    bc_lower = dde.icbc.DirichletBC(
+        geomtime,
+        lambda x: np.zeros((len(x), 1)),
+        lambda x, on_boundary: on_boundary and np.isclose(x[0], 0.0),
+    )
+    bc_upper = dde.icbc.DirichletBC(
+        geomtime,
+        lambda x: x[:, 0:1] - K * np.exp(-r * x[:, 1:2]),
+        lambda x, on_boundary: on_boundary and np.isclose(x[0], S_max),
+    )
+
+**Sampling Strategy**:
+To improve domain coverage and training stability, we use the **Sobol sequence** for sampling points. We select sample sizes as powers of 2 to avoid Sobol sequence warnings (2048 domain points, 64 boundary points, 128 initial points):
+
+.. code-block:: python
+
+    data = dde.data.TimePDE(
+        geomtime,
+        pde,
+        [ic, bc_lower, bc_upper],
+        num_domain=2047, # 2048 - 1 center point
+        num_boundary=63,
+        num_initial=127,
+        num_test=2047,
+        train_distribution="Sobol",
+    )
+
+**Network Architecture**:
+We use a fully connected neural network with **4 hidden layers** and **28 neurons** per layer, using ``tanh`` activation and ``Glorot normal`` initialization:
+
+.. code-block:: python
+
+    net = dde.nn.FNN([2] + [28] * 4 + [1], "tanh", "Glorot normal")
+
+**Training Strategy**:
+We employ a two-stage training process: first using the **Adam** optimizer for 20,000 iterations, followed by **L-BFGS** to fine-tune the solution and achieve lower residual error.
+
+.. code-block:: python
+
+    model = dde.Model(data, net)
+    model.compile("adam", lr=1e-3)
+    model.train(iterations=20000)
+    model.compile("L-BFGS")
+    losshistory, train_state = model.train()
+
+Validation
+----------
+
+The model is validated against the analytical Black-Scholes formula. We expect an L2 relative error around ``1e-3`` and a mean PDE residual around ``0.05``.
+
+References
+----------
+
+.. [1] Tanios, R. (2021). "Physics Informed Neural Networks in Computational Finance: High Dimensional Forward & Inverse Option Pricing". ETH Zurich Master's Thesis. https://doi.org/10.3929/ethz-b-000491555
+
+Complete code
+-------------
+
+.. literalinclude:: ../../../examples/pinn_forward/black_scholes_call.py
+   :language: python
+

examples/pinn_forward/black_scholes_call.py

@@ -0,0 +1,128 @@
+"""Backend supported: tensorflow.compat.v1, tensorflow, pytorch, paddle
+
+Black-Scholes PDE for European call option pricing using PINN.
+
+This example solves the Black-Scholes PDE in time-to-maturity form:
+    dV/dtau = 0.5*sigma^2*S^2*d^2V/dS^2 + r*S*dV/dS - r*V
+
+where:
+    S    : underlying asset price  (x[:, 0])
+    tau  : time to maturity        (x[:, 1])
+    V    : option price            (network output y)
+
+with boundary conditions:
+    V(S, 0)     = max(S - K, 0)              [Initial condition at maturity]
+    V(0, tau)   = 0                          [Lower boundary]
+    V(S_max, tau) = S_max - K*exp(-r*tau)   [Upper boundary]
+
+Reference:
+    Tanios, R. (2021). "Physics Informed Neural Networks in Computational Finance:
+    High Dimensional Forward & Inverse Option Pricing". ETH Zurich Master's Thesis.
+    https://doi.org/10.3929/ethz-b-000491555
+"""
+
+import deepxde as dde
+import numpy as np
+from scipy.stats import norm
+
+
+# Problem parameters
+K = 50.0      # Strike price
+r = 0.05      # Risk-free rate
+sigma = 0.2   # Volatility
+T = 1.0       # Time to maturity
+S_max = 150.0 # Maximum stock price
+
+
+def pde(x, y):
+    """Black-Scholes PDE residual.
+
+    Args:
+        x: Input tensor.
+            x[:, 0]: asset price S
+            x[:, 1]: time to maturity tau
+        y: Network output representing the option price V(S, tau).
+
+    Returns:
+        PDE residual: dV/dtau - (0.5*sigma^2*S^2*d^2V/dS^2 + r*S*dV/dS - r*V)
+    """
+    S = x[:, 0:1]
+    dV_tau = dde.grad.jacobian(y, x, i=0, j=1)
+    dV_S   = dde.grad.jacobian(y, x, i=0, j=0)
+    dV_SS  = dde.grad.hessian(y, x, i=0, j=0)
+    return dV_tau - (0.5 * sigma**2 * S**2 * dV_SS + r * S * dV_S - r * y)
+
+
+def black_scholes_call(S, tau):
+    """Analytical Black-Scholes formula."""
+    tau = np.maximum(tau, 1e-8)
+    S = np.maximum(S, 1e-10)
+    d1 = (np.log(S / K) + (r + 0.5 * sigma**2) * tau) / (sigma * np.sqrt(tau))
+    d2 = d1 - sigma * np.sqrt(tau)
+    return S * norm.cdf(d1) - K * np.exp(-r * tau) * norm.cdf(d2)
+
+
+def gen_testdata():
+    """Generate test data with analytical solution."""
+    S = np.linspace(0, S_max, 256).reshape(256, 1)
+    tau = np.linspace(0, T, 201).reshape(201, 1)
+    SS, TT = np.meshgrid(S, tau)
+    X = np.vstack((np.ravel(SS), np.ravel(TT))).T
+    y = np.array([black_scholes_call(X[i, 0], X[i, 1]) for i in range(len(X))])
+    return X, y[:, None]
+
+
+# Computational geometry
+geom = dde.geometry.Interval(0, S_max)
+timedomain = dde.geometry.TimeDomain(0, T)
+geomtime = dde.geometry.GeometryXTime(geom, timedomain)
+
+# Boundary and initial conditions
+ic = dde.icbc.IC(
+    geomtime,
+    lambda x: np.maximum(x[:, 0:1] - K, 0.0),
+    lambda _, on_initial: on_initial,
+)
+bc_lower = dde.icbc.DirichletBC(
+    geomtime,
+    lambda x: np.zeros((len(x), 1)),
+    lambda x, on_boundary: on_boundary and np.isclose(x[0], 0.0),
+)
+bc_upper = dde.icbc.DirichletBC(
+    geomtime,
+    lambda x: x[:, 0:1] - K * np.exp(-r * x[:, 1:2]),
+    lambda x, on_boundary: on_boundary and np.isclose(x[0], S_max),
+)
+
+# Define PDE problem
+data = dde.data.TimePDE(
+    geomtime,
+    pde,
+    [ic, bc_lower, bc_upper],
+    num_domain=2047,
+    num_boundary=63,
+    num_initial=127,
+    num_test=2047,
+    train_distribution="Sobol",
+)
+
+# Neural network
+net = dde.nn.FNN([2] + [28] * 4 + [1], "tanh", "Glorot normal")
+model = dde.Model(data, net)
+
+# Training
+model.compile("adam", lr=1e-3)
+model.train(iterations=20000)
+model.compile("L-BFGS")
+losshistory, train_state = model.train()
+
+# Plot and save results
+dde.saveplot(losshistory, train_state, issave=True, isplot=True)
+
+# Validation
+X, y_true = gen_testdata()
+y_pred = model.predict(X)
+f = model.predict(X, operator=pde)
+print("Mean residual:", np.mean(np.absolute(f)))
+print("L2 relative error:", dde.metrics.l2_relative_error(y_true, y_pred))
+np.savetxt("test.dat", np.hstack((X, y_true, y_pred)))