Multidimensional Quasi-monte Carlo Malliavin Greeks

The authors investigate the use of Malliavin calculus in order to calculate the Greeks of multidimensional complex path-dependent options by simulation. For this purpose, they extend the formulas employed by Montero and Kohatsu-Higa to the multidimensional case. The multidimensional setting shows the convenience of the Malliavin Calculus approach over different techniques that have been previously proposed. Indeed, these techniques may be computationally expensive and do not provide flexibility for variance reduction. In contrast, the Malliavin approach exhibits a higher flexibility by providing a class of functions that return the same expected value (the Greek) with different accuracies. This versatility for variance reduction is not possible without the use of the generalized integral by part formula of Malliavin Calculus.

Provided by: Cornell University Topic: Big Data Date Added: Mar 2011 Format: PDF

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