Advanced Search
MyIDEAS: Login

Toward real-time pricing of complex financial derivatives

Contents:

Author Info

  • S. Ninomiya
  • S. Tezuka
Registered author(s):

    Abstract

    In this paper, we investigate the feasibility of using low-discrepancy sequences to allow complex derivatives, such as mortgage-backed securities (MBSs) and exotic options, to be calculated considerably faster than is possible by using conventional Monte Carlo methods. In our experiments, we examine classical classes of low-discrepancy sequences, such as Halton, Sobol', and Faure sequences, as well as the very recent class called generalized Niederreiter sequences, in the light of the actual convergence rate of numerical integration with practical numbers of dimensions. Our results show that for the problems of pricing financial derivatives that we tested: (1) generalized Niederreiter sequences perform markedly better than both classical sequences and Monte Carlo methods; and (2) classical low-discrepancy sequences often perform worse than Monte Carlo methods. Finally, we discuss several important research issues from both practical and theoretical viewpoints.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.tandfonline.com/doi/abs/10.1080/13504869600000001
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal Applied Mathematical Finance.

    Volume (Year): 3 (1996)
    Issue (Month): 1 ()
    Pages: 1-20

    as in new window
    Handle: RePEc:taf:apmtfi:v:3:y:1996:i:1:p:1-20

    Contact details of provider:
    Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=100141

    Order Information:
    Web: http://www.tandf.co.uk/journals/subscription.asp

    Related research

    Keywords: low-discrepancy sequences; generalized Niederreiter sequences; Faure sequences; Sobol' sequences; financial derivatives;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Boyle, Phelim & Broadie, Mark & Glasserman, Paul, 1997. "Monte Carlo methods for security pricing," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1267-1321, June.
    2. Tsutomu Tamura, 2005. "Comparison of randomization techniques for low-discrepancy sequences in finance," Asia-Pacific Financial Markets, Springer, vol. 12(3), pages 227-244, September.
    3. Josh Lerner, 2004. "Where Does State Street Lead? First Look at Finance Patents, 1971-2000," Levine's Working Paper Archive 122247000000000497, David K. Levine.
    4. Tan, Ken Seng & Boyle, Phelim P., 2000. "Applications of randomized low discrepancy sequences to the valuation of complex securities," Journal of Economic Dynamics and Control, Elsevier, vol. 24(11-12), pages 1747-1782, October.
    5. Okten, Giray & Eastman, Warren, 2004. "Randomized quasi-Monte Carlo methods in pricing securities," Journal of Economic Dynamics and Control, Elsevier, vol. 28(12), pages 2399-2426, December.
    6. Gerstner, Thomas & Griebel, Michael & Holtz, Markus, 2009. "Efficient deterministic numerical simulation of stochastic asset-liability management models in life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 44(3), pages 434-446, June.
    7. Boyle, Phelim & Imai, Junichi & Tan, Ken Seng, 2008. "Computation of optimal portfolios using simulation-based dimension reduction," Insurance: Mathematics and Economics, Elsevier, vol. 43(3), pages 327-338, December.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:3:y:1996:i:1:p:1-20

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.