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A Generalisation of Malliavin Weighted Scheme for Fast Computation of the Greeks

Author

Listed:
  • Eric Benhamou

Abstract

This paper presented a new technique for the simulation of the Greeks (i.e. price sensitivities to parameters), efficient for strongly discontinuous payoff options. The use of Malliavin calculus, by means of an integration by parts, enables to shift the differentiation operator from the payoff function to the diffusion kernel, introducing a weighting function.(Fournie et al. (1999)). Expressing the weighting function as a Skorohod integral, we show how to characterise the integrand with necessary and sufficient conditions, giving a complete description of weighting function solutions. Interestingly, for adapted process, the Skorohod integral turns to be the classical Ito integral.

Suggested Citation

  • Eric Benhamou, 2000. "A Generalisation of Malliavin Weighted Scheme for Fast Computation of the Greeks," FMG Discussion Papers dp350, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp350
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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