Update 21.02.2016: Added values for QR decomposition with pivoting and QuantLib performance improvements.

Least Squares Monte Carlo simulations spend a significant amount of the total computation time on the generalized least squares especially if the problem itself has a high dimensional state. Preferred techniques to solve the normal equations are the QR decomposition

where is orthogonal and is upper triangular or the singular value decomposition (SVD)

where is column-orthogonal, is an orthogonal matrix and is a positive semi-definite diagonal matrix. The Cholesky Factorization

where is a lower triangular is the fasted method but often numerically unstable. The author in [1] summaries all methods and also outlines the computational efforts involved for observations and parameters as

- Chlolesky Factorization: costs flops
- QR decomposition: costs flops
- Singular value decomposition: costs flops

For LSMC simulations we have and therefore the QR decomposition has no computational advantages over the SVD. Since a QR decomposition without column pivoting has numerical problems if is rank-deficient, the singular value decomposition is often the method of choice for LSMC simulations.

All three decomposition methods are available in QuantLib, in LAPACK (with or without optimized OpenBLAS library) and in Intel’s MKL library. A standard Swing option valuation via LSMC should serve as a test bed to measure the performance of the QR decomposition with and without column pivoting and of the SVD algorithm. For LAPACK and MKL the methods dgels and dgesvd have been used to implement the SVD and the QR decomposition without pivoting whereas QR with pivoting is based on dgeqp3, dormqr and dtrsm. In order to keep results comparable the single thread performance was measured in all cases. The reference prices are calculated via finite difference methods and all LSMC implementations have led to the same price in line with the reference price. The current QR implementation in QuantLib 1.7 has a performance issue if the number of rows is much larger than the number of columns. For these tests an improved version of QuantLib’s QR decomposition has been used.

As expected MKL is often the fasted library but the difference between MKL and LAPACK plus OpenBLAS is small.

[1] Do Q Lee, 2012, Numerically Efficient Methods for Solving Least Squares Problems

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so should we replace the QR and possibly SVD decompositions in QuantLib by wrapped LAPACK ones ?

For the QR decomposition I’ve found the reason for the performance differences. The current implementation is suboptimal if #rows >> #columns (my own fault). After fixing it the QR numbers are looking much better now.

In general I don’t know if LAPACK’s copyrights are compatible with QuantLib’s license(?)