Application of Quasi Monte Carlo and Global Sensitivity Analysis to Option Pricing and Greeks

Stefano Scoleri, Marco Bianchetti and Sergei Kucherenko

Papers from arXiv.org

Abstract: Quasi Monte Carlo (QMC) and Global Sensitivity Analysis (GSA) techniques are applied for pricing and hedging representative financial instruments of increasing complexity. We compare standard Monte Carlo (MC) vs QMC results using Sobol' low discrepancy sequences, different sampling strategies, and various analyses of performance. We find that QMC outperforms MC in most cases, including the highest-dimensional simulations, showing faster and more stable convergence. Regarding greeks computation, we compare standard approaches, based on finite differences (FD) approximations, with adjoint methods (AAD) providing evidences that, when the number of greeks is small, the FD approach combined with QMC can lead to the same accuracy as AAD, thanks to increased convergence rate and stability, thus saving a lot of implementation effort while keeping low computational cost. Using GSA, we are able to fully explain our findings in terms of reduced effective dimension of QMC simulation, allowed in most cases, but not always, by Brownian Bridge discretization or PCA construction. We conclude that, beyond pricing, QMC is a very effcient technique also for computing risk measures, greeks in particular, as it allows to reduce the computational effort of high dimensional Monte Carlo simulations typical of modern risk management.

Date: 2026-02
References: Add references at CitEc
Citations:

Published in Wilmott Volume 2021, Issue 116, November 2021, pages 66-83

Downloads: (external link)
http://arxiv.org/pdf/2602.14354 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2602.14354

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().