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Estimating expected first passage times using multilevel Monte Carlo algorithm

Abstract:

In this paper we devise a method of numerically estimating the expected first passage times of stochastic processes. We use Monte Carlo path simulations with Milstein discretisation scheme to approximate the solutions of scalar stochastic differential equations. To further reduce the variance of the estimated expected stopping time and improve computational efficiency, we use the multi-level Monte Carlo algorithm, recently developed by Giles (2008a), and other variance-reduction techniques. O...

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Tom Primozic More by this author
Publication date:
2011-06-24
URN:
uuid:a0ed6441-7f5f-4623-927e-0225c9b5c19c
Local pid:
oai:eprints.maths.ox.ac.uk:1383

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