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On the error of the...
On the error of the Monte Carlo pricing method for Asian option
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- Abramowicz, Konrad, 1983- (författare)
- Umeå universitet,Institutionen för matematik och matematisk statistik
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- Seleznjev, Oleg, 1954- (författare)
- Umeå universitet,Institutionen för matematik och matematisk statistik
-
(creator_code:org_t)
- 2008
- 2008
- Engelska.
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Ingår i: Journal of Numerical and Applied Mathematics. - 0868-6912. ; 96:1, s. 1-10
- Relaterad länk:
-
https://urn.kb.se/re...
Abstract
Ämnesord
Stäng
- We consider a Monte Carlo method to price a continuous arithmetic Asian option with a given precision. Piecewise constant approximation and plain simulation are used for a wide class of models based on L\'{e}vy processes. We give bounds of the possible discretization and simulation errors. The sufficient numbers of discretization points and simulations to obtain requested accuracy are derived. To demonstrate the general approach, the Black-Scholes model is studied in more detail. We undertake the case of continuous averaging and starting time zero, but the obtained results can be applied to the discrete case and generalized for any time before an execution date. Some numerical experiments and comparison to the PDE based method are also presented.
Ämnesord
- NATURVETENSKAP -- Matematik -- Sannolikhetsteori och statistik (hsv//swe)
- NATURAL SCIENCES -- Mathematics -- Probability Theory and Statistics (hsv//eng)
Nyckelord
- Asian option
- Levy processes
- Monte Carlo
- Mathematical statistics
- Matematisk statistik
- Mathematical Statistics
- matematisk statistik
Publikations- och innehållstyp
- ref (ämneskategori)
- art (ämneskategori)
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