Efficient Monte Carlo simulation for integral functionals of Brownian motion
In the paper, we develop a variance reduction technique for Monte Carlo simulations of integral functionals of a Brownian motion. The procedure is based on a new method of sampling the process, which combines the Brownian bridge construction with conditioning on integrals along paths of the process....
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| Veröffentlicht in: | Journal of Complexity 2014-06, Vol.30 (3), p.255-278 |
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| container_title | Journal of Complexity |
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| creator | Kolkiewicz, Adam W. |
| description | In the paper, we develop a variance reduction technique for Monte Carlo simulations of integral functionals of a Brownian motion. The procedure is based on a new method of sampling the process, which combines the Brownian bridge construction with conditioning on integrals along paths of the process. The key element in our method is the identification of a low-dimensional vector of variables that reduces the dimension of the integration problem more effectively than the Brownian bridge. We illustrate the method by applying it in conjunction with low-discrepancy sequences to the problem of pricing Asian options. |
| doi_str_mv | 10.1016/j.jco.2013.12.005 |
| format | Article |
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| ispartof | Journal of Complexity, 2014-06, Vol.30 (3), p.255-278 |
| issn | 0885-064X 1090-2708 |
| language | eng |
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| source | Elektronische Zeitschriftenbibliothek - Frei zugängliche E-Journals; ScienceDirect Journals (5 years ago - present) |
| subjects | Asian options Brownian bridge Brownian motion Computer simulation Functionals Integrals Integrals of Brownian motion Mathematical analysis Monte Carlo methods Quasi-Monte Carlo Sampling Stratified sampling Vectors (mathematics) |
| title | Efficient Monte Carlo simulation for integral functionals of Brownian motion |
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