Amostragem Descritiva no Apreçamento de Opções Européias através de Simulação Monte Carlo: o Efeito da Dimensionalidade e da Probabilidade de Exercício no Ganho de Precisão
The purpose of this paper is to evaluate the effect of dimensionality and probability of exercise of a European call option on the precision improvements obtained by the usage of Descriptive Sampling on a Monte Carlo Simulation to price such derivative as opposed to the use of traditional Simple Random Sampling. After verifying the absence of bias, the precision of the estimates was assessed by their standard error. The results show that the statistical efficiency of both techniques is unaffected by an increase of dimensionality and maintain their level of precision. However, as to the exercise price, although Descriptive Sampling proved to be more efficient than Simple Random Sampling, the improvement weakens as the option’s exercise probability declines. Although this work relates to European options, other options should behave similarly in regard to dimensionality and exercise price.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number
134.
Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.