Exact Simulation Of The 3/2 Model
AbstractThis paper discusses the exact simulation of the stock price process underlying the 3/2 model. Using a result derived by Craddock and Lennox using Lie Symmetry Analysis, we adapt the Broadie-Kaya algorithm for the simulation of affine processes to the 3/2 model. We also discuss variance reduction techniques and find that conditional Monte Carlo techniques combined with quasi-Monte Carlo point sets result in significant variance reductions.
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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): 15 (2012)
Issue (Month): 05 ()
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- Jan Baldeaux & Dale Roberts, 2012.
"Quasi-Monte Carlo methods for the Heston model,"
1202.3217, arXiv.org, revised May 2012.
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