On the Efficiency of Simplified Weak Taylor Schemes for Monte Carlo Simulation in Finance

Nicola Bruti-Liberati and Eckhard Platen ()

No 114, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: The purpose of this paper is to study the efficiency of simplified weak schemes for stochastic differential equations. We present a numerical comparison between weak Taylor schemes and their simplified versions. In the simplified schemes discrete random variables, instead of Gaussian ones, are generated to approximate multiple stochastic integrals. We show that an implementation of simplified schemes based on random bits generators significantly increases the computational speed. The efficiency of the proposed schemes is demonstrated.

Keywords: random bits generators; stochastic differential equations; simplified weak taylor schemes (search for similar items in EconPapers)
Pages: 12 pages
Date: 2004-01-01
New Economics Papers: this item is included in nep-cmp and nep-fin
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Citations: View citations in EconPapers (7)

Published as: Bruti Liberati, N. and PLaten, E., 2004, "On the Efficiency of Simplified Weak Taylor Schemes for Monte Carlo Simulation in Finance", In: Computational Science - ICCS 2004: Lecture Notes in Computer Science, 771-778.

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