IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Smart Monte Carlo: Various tricks using Malliavin calculus

  • Eric Benhamou

    (Goldman Sachs International)

Current Monte Carlo pricing engines may face computational challenge for the Greeks, because of not only their time consumption but also their poor convergence when using a finite difference estimate with a brute force perturbation. The same story may apply to conditional expectation. In this short paper, following Fournié et al. (1999), we explain how to tackle this issue using Malliavin calculus to smoothen the payoff to estimate. We discuss the relationship with the likelihood ration method of Broadie and Glasserman (1996). We show on numerical results the efficiency of this method and discuss when it is appropriate or not to use it. We see how to apply this method to the Heston model.

If you experience problems downloading a file, check if you have the proper application to view it first. 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.

File URL: http://128.118.178.162/eps/fin/papers/0212/0212004.pdf
Download Restriction: no

Paper provided by EconWPA in its series Finance with number 0212004.

as
in new window

Length: 126 pages
Date of creation: 21 Dec 2002
Date of revision:
Handle: RePEc:wpa:wuwpfi:0212004
Note: Type of Document - PDF; prepared on windows; pages: 126
Contact details of provider: Web page: http://128.118.178.162

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0212004. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.