NEARLY EXACT OPTION PRICE SIMULATION USING CHARACTERISTIC FUNCTIONS

NEARLY EXACT OPTION PRICE SIMULATION USING CHARACTERISTIC FUNCTIONS

This paper presents a new approach to perform a nearly unbiased simulation using inversion of the characteristic function. As an application we are able to give unbiased estimates of the price of forward starting options in the Heston model and of continuously monitored Parisian options in the Black...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:International journal of theoretical and applied finance 2012-11, Vol.15 (7), p.1250047-17
Hauptverfasser: BERNARD, CAROLE, CUI, ZHENYU, MCLEISH, DON
Format: Artikel
Sprache:eng
Schlagworte:
Bias
Option pricing
Probability theory
Simulation techniques
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
Beschreibung
Zusammenfassung:This paper presents a new approach to perform a nearly unbiased simulation using inversion of the characteristic function. As an application we are able to give unbiased estimates of the price of forward starting options in the Heston model and of continuously monitored Parisian options in the Black-Scholes framework. This method of simulation can be applied to problems for which the characteristic functions are easily evaluated but the corresponding probability density functions are complicated.
ISSN:0219-0249
1793-6322
DOI:10.1142/S0219024912500471