Optimal importance sampling with explicit formulas in continuous time
نویسندگان
چکیده
In the Black-Scholes model, consider the problem of selecting a change of drift which minimizes the variance of Monte Carlo estimators for prices of path-dependent options. Employing Large Deviations techniques, the asymptotically optimal change of drift is identified as the solution to a one-dimensional variational problem, which may be reduced to the associated Euler-Lagrange differential equation. Closed-form solutions for geometric and arithmetic average Asian options are provided. Mathematics Subject Classification (2000) Primary 91B28 · Secondary 60F10, 65C05
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ورودعنوان ژورنال:
- Finance and Stochastics
دوره 12 شماره
صفحات -
تاریخ انتشار 2008