Pricing and hedging American options by Monte Carlo methods using a Malliavin calculus approach
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Vlad Bally
Following the pioneering papers of Fournié, Lasry, Lebouchoux, Lions and Touzi, an important work concerning the applications of the Malliavin calculus in numerical methods for mathematical finance has come after. One is concerned with two problems: computation of a large number of conditional expectations on one hand and computation of Greeks (sensitivities) on the other hand. A significant test of the power of this approach is given by its application to pricing and hedging American options. The paper gives a global and simplified presentation of this topic including the reduction of variance techniques based on localization and control variables. A special interest is given to practical implementation, number of numerical tests are presented and their performances are carefully discussed.
Copyright 2005, Walter de Gruyter
Articles in the same Issue
- Pricing and hedging American options by Monte Carlo methods using a Malliavin calculus approach
- Asymptotical behavior of linear congruential generators
- Construction of three-dimensional low discrepancy sequences
- Direct Simulation and Mass Flow Stochastic Algorithms to Solve a Sintering-Coagulation Equation
- Editorial Board
Articles in the same Issue
- Pricing and hedging American options by Monte Carlo methods using a Malliavin calculus approach
- Asymptotical behavior of linear congruential generators
- Construction of three-dimensional low discrepancy sequences
- Direct Simulation and Mass Flow Stochastic Algorithms to Solve a Sintering-Coagulation Equation
- Editorial Board
