Monte Carlo methods for security pricing

Monte Carlo methods for security pricing The Monte Carlo approach has proved to be a valuable and flexible computational tool in modern finance. This paper discusses some of the recent applications of the Monte Carlo method to security pricing problems, with emphasis on improvements in efficiency. We first review some variance reduction methods that have proved useful in finance. Then we describe the use of deterministic low-discrepancy sequences, also known as quasi-Monte Carlo methods, for the valuation of complex derivative securities. We summarize some recent applications of the Monte Carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of American options. We conclude by mentioning other applications. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Dynamics and Control Elsevier

Monte Carlo methods for security pricing

Loading next page...
 
/lp/elsevier/monte-carlo-methods-for-security-pricing-iiNLGWmo0y
Publisher
Elsevier
Copyright
Copyright © 1997 Elsevier Ltd
ISSN
0165-1889
eISSN
1879-1743
DOI
10.1016/S0165-1889(97)00028-6
Publisher site
See Article on Publisher Site

Abstract

The Monte Carlo approach has proved to be a valuable and flexible computational tool in modern finance. This paper discusses some of the recent applications of the Monte Carlo method to security pricing problems, with emphasis on improvements in efficiency. We first review some variance reduction methods that have proved useful in finance. Then we describe the use of deterministic low-discrepancy sequences, also known as quasi-Monte Carlo methods, for the valuation of complex derivative securities. We summarize some recent applications of the Monte Carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of American options. We conclude by mentioning other applications.

Journal

Journal of Economic Dynamics and ControlElsevier

Published: Jun 29, 1997

References

  • ALGORITHM 659: Implementing Sobol's quasirandom sequence generator
    Bratley, P.; Fox, B.
  • Implementation and tests of low-discrepancy sequences
    Bratley, P.; Fox, B.L.; Niederreiter, H.
  • The valuation of American options on multiple assets
    Broadie, M.; Detemple, J.
  • American option valuation: new bounds, approximations, and a comparison of existing methods
    Broadie, M.; Detemple, J.
  • Pricing American-style securities using simulation
    Broadie, M.; Glasserman, P.
  • Non-uniform Random Variate Generation
    Devroye, L.
  • The American put options valued analytically
    Geske, R.; Johnson, H.E.
  • Optimization of stochastic systems via simulation
    Glynn, P.W.
  • The asymptotic efficiency of simulation estimators
    Glynn, P.W.; Whitt, W.
  • The pricing of options on assets with stochastic volatilities
    Hull, J.; White, A.
  • Discrete Event Systems
    Rubinstein, R.; Shapiro, A.
  • Prepayment and the valuation of mortgage-backed securities
    Schwartz, E.S.; Torous, W.N.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off