The computation of Greeks with multilevel Monte Carlo

Autor:	Burgos, Sylvestre, Giles, M. B.
Rok vydání:	2011
Předmět:	Quantitative Finance - Computational Finance 65B99
Druh dokumentu:	Working Paper
Popis:	We study the use of the multilevel Monte Carlo technique in the context of the calculation of Greeks. The pathwise sensitivity analysis differentiates the path evolution and reduces the payoff's smoothness. This leads to new challenges: the inapplicability of pathwise sensitivities to non-Lipschitz payoffs often makes the use of naive algorithms impossible. These challenges can be addressed in three different ways: payoff smoothing using conditional expectations of the payoff before maturity; approximating the previous technique with path splitting for the final timestep; using of a hybrid combination of pathwise sensitivity and the Likelihood Ratio Method. We investigate the strengths and weaknesses of these alternatives in different multilevel Monte Carlo settings. Comment: Technical Report (December 2010)
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/1102.1348 Zobrazit plný text záznamu View this record from Arxiv