Optimal Limit Methods for Computing Sensitivities of
We introduce a new approach to computing sensitivities of discontinuous integrals.The methodology is generic in that it only requires knowledge of the simulation scheme and the location of the integrand's singularities. The methodology is proven to be optimal in terms of minimizing the variance of the measure changes caused by the elimination of the discontinuities for finite bump sizes. An efficient adjoint implementation of the small bump-size limit is discussed, and the method is shown to be effective for a number of natural examples involving triggerable interest rate derivative securities.
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- Mark Broadie & Paul Glasserman, 1996. "Estimating Security Price Derivatives Using Simulation," Management Science, INFORMS, vol. 42(2), pages 269-285, February.
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