Quasi-Monte Carlo methods for the Kou model

Baldeaux Jan
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Baldeaux Jan: School of Mathematics and Statistics, University of New South Wales, Sydney, NSW 2052, Australia. Email: z3177364@science.unsw.edu.au

Monte Carlo Methods and Applications, 2008, vol. 14, issue 4, 281-302

Abstract: We firstly show how to formulate the finance problem as an integration problem so that QMC methods can be applied to it. Consequently, we introduce QMC approaches for the integration problems pertaining to the Poisson processes, compound Poisson processes and jump-diffusion processes underlying the Kou model. As opposed to increment-by-increment approaches, our approaches change the ordering of the variates in the integration problems to pack more variance into the opening dimensions. We report numerical experiments indicating that the approaches introduced achieve lower standard errors than the increment-by-increment approaches.

Date: 2008
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DOI: 10.1515/MCMA.2008.012

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