Multilevel Path Branching for Digital Options
Fuente:
arXiv
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| Autores principales: | , |
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| Formato: | Preprint |
| Publicado: |
2022
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| Materias: | |
| Acceso en línea: | |
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| _version_ | 1866910492506718208 |
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| author | Giles, Michael B. Haji-Ali, Abdul-Lateef |
| author_facet | Giles, Michael B. Haji-Ali, Abdul-Lateef |
| contents | We propose a new Monte Carlo-based estimator for digital options with assets modelled by a stochastic differential equation (SDE). The new estimator is based on repeated path splitting and relies on the correlation of approximate paths of the underlying SDE that share parts of a Brownian path. Combining this new estimator with Multilevel Monte Carlo (MLMC) leads to an estimator with a computational complexity that is similar to the complexity of a MLMC estimator when applied to options with Lipschitz payoffs.
This preprint includes detailed calculations and proofs (in grey colour) which are not peer-reviewed and not included in the published article. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2209_03017 |
| institution | arXiv |
| publishDate | 2022 |
| record_format | arxiv |
| spellingShingle | Multilevel Path Branching for Digital Options Giles, Michael B. Haji-Ali, Abdul-Lateef Numerical Analysis Computational Finance (Primary) 65C05, 65C30, (secondary) 65B99, 60J85 We propose a new Monte Carlo-based estimator for digital options with assets modelled by a stochastic differential equation (SDE). The new estimator is based on repeated path splitting and relies on the correlation of approximate paths of the underlying SDE that share parts of a Brownian path. Combining this new estimator with Multilevel Monte Carlo (MLMC) leads to an estimator with a computational complexity that is similar to the complexity of a MLMC estimator when applied to options with Lipschitz payoffs. This preprint includes detailed calculations and proofs (in grey colour) which are not peer-reviewed and not included in the published article. |
| title | Multilevel Path Branching for Digital Options |
| topic | Numerical Analysis Computational Finance (Primary) 65C05, 65C30, (secondary) 65B99, 60J85 |
| url | https://arxiv.org/abs/2209.03017 |