Pricing And Deltas Of Discretely-Monitored Barrier Options Using Stratified Sampling On The Hitting-Times To The Barrier
We 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.
Volume (Year): 13 (2010)
Issue (Month): 05 ()
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