A Generalisation of Malliavin Weighted Scheme for Fast Computation of the Greeks

Eric Benhamou ()

Finance from EconWPA

Abstract: This paper presented a new technique for the simulation of the Greeks (i.e. price sensitivities to parameters), efficient for strongly discontinuous payo¤ options. The use of Malliavin calculus, by means of an integration by parts, enables to shift the differentiation operator from the payo¤ function to the diffusion kernel, introducing a weighting function.(Fournie et al. (1999)). Expressing the weighting function as a Skorohod integral, we show how to characterize the integrand with necessary and sufficient conditions, giving a complete description of weighting function solutions. Interestingly, for adapted process, the Skorohod integral turns to be the classical Ito integral.

Keywords: Monte-Carlo; Quasi-Monte Carlo; Greeks; Malliavin Calculus; Wiener Chaos. (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2002-12-21
Note: Type of Document - PDF; prepared on windows; pages: 126
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0212003

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