# 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

Journal of Economic Dynamics and Control, Volume 21 (8) – Jun 29, 1997
55 pages

/lp/elsevier/monte-carlo-methods-for-security-pricing-iiNLGWmo0y
Publisher
Elsevier
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
• American option valuation: new bounds, approximations, and a comparison of existing methods
• Pricing American-style securities using simulation
• 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
that matters to you.

over 18 million articles from more than
15,000 peer-reviewed journals.

All for just \$49/month

### 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.

DeepDyve

DeepDyve

### Pro

Price

FREE

\$49/month
\$360/year

Save searches from
PubMed

Create folders to

Export folders, citations