Efficient simulation of a multi-factor stochastic volatility model

Monte Carlo Simulation of a Two-Factor Stochastic Volatility Model

Efficient Simulation of the Heston Stochastic Volatility Model

Stochastic volatility models are increasingly important in practical derivatives pricing applications, yet relatively little work has been undertaken in the development of practical Monte Carlo simulation methods for this class of models. This paper considers several new algorithms for time-discretization and Monte Carlo simulation of Heston-type stochastic volatility models. The algorithms are...

Efficient unbiased simulation scheme for the SABR stochastic volatility model

The stochastic Alpha Beta Rho stochastic volatility (SABR-SV) model is widely used in the financial industry for the pricing of fixed income instruments. In this paper we develop an unbiased simulation scheme for the SABR-SV model, which deals efficiently with (undesired) possible negative values, the martingale property of the discrete scheme and the discretization bias of commonly used Euler ...

Efficient Monte Carlo Simulation with Stochastic Volatility

Monte Carlo simulation is a powerful aid in many fields. In this thesis it is used for pricing of financial derivatives. Achieving accurate results with Monte Carlo is rather timeconsuming due to its slow convergence. However, there are ways to improve the accuracy of each simulation, for instance by reducing the inevitable discretization bias. In our financial context, this concerns the discre...

Positive stochastic volatility simulation

We present a positivity preserving numerical scheme for the pathwise solution of nonlinear stochastic differential equations driven by a multi-dimensional Wiener process and governed by non-commutative linear and non-Lipschitz vector fields. This strong order one scheme uses: (i) Strang exponential splitting, an approximation that decomposes the stochastic flow separately into the drift flow, a...