Pricing And Deltas Of Discretely-Monitored Barrier Options Using Stratified Sampling On The Hitting-Times To The Barrier
AbstractWe develop new Monte Carlo techniques based on stratifying the stock's hitting-times to the barrier for the pricing and Delta calculations of discretely-monitored barrier options using the Black-Scholes model. We include a new algorithm for sampling an Inverse Gaussian random variable such that the sampling is restricted to a subset of the sample space. We compare our new methods to existing Monte Carlo methods and find that they can substantially improve convergence speeds.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.
Volume (Year): 13 (2010)
Issue (Month): 05 ()
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Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
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- Nico Achtsis & Ronald Cools & Dirk Nuyens, 2011. "Conditional sampling for barrier option pricing under the LT method," Papers 1111.4808, arXiv.org, revised Dec 2012.
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