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Computing Greeks with Multilevel Monte Carlo Methods using Importance Sampling

Abstract:

This paper presents a new efficient way to reduce the variance of an estimator of popular payoffs and greeks encounter in financial mathematics. The idea is to apply Importance Sampling with the Multilevel Monte Carlo recently introduced by M.B. Giles. So far, Importance Sampling was proved successful in combination with standard Monte Carlo method. We will show efficiency of our approach on the estimation of financial derivatives prices and then on the estimation of Greeks (i.e. sensitivitie...

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Thomas Euget More by this author
Publication date:
2012
URN:
uuid:11b4cba3-37ed-4225-9023-40a529a9e2c6
Local pid:
oai:eprints.maths.ox.ac.uk:1586

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