Adaptative Monte Carlo Method, A Variance Reduction Technique

Arouna Bouhari

Monte Carlo Methods and Applications, 2004, vol. 10, issue 1, 1-24

Abstract: In this article we propose an adaptative variance reduction method for Monte Carlo simulations. The method uses importance sampling scheme based on a change of drift. The change of drift is selected adaptatively through the Monte Carlo computation by using a suitable sequence of approximation. We state and prove theoretical results supporting the use of the method. We develop two applications of the procedure for variance reduction in a Monte Carlo computation in finance and in reliability.

Keywords: Monte Carlo methods; variance reduction; Importance Sampling; Robbins–Monro algorithms; Martingales; Chen projection method. (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (6)

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DOI: 10.1515/156939604323091180

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