 A general control variate method for multi-dimensional SDEs: An application to multi-asset options under local stochastic volatility with jumps models in financeKenichiro Shiraya and Akihiko Takahashi European Journal of Operational Research, 2017, vol. 258, issue 1, 358-371 Abstract: This paper presents a new control variate method for general multi-dimensional stochastic differential equations (SDEs) including jumps in order to reduce the variance of Monte Carlo method. Our control variate method is based on an asymptotic expansion technique, and does not require an explicit characteristic function of SDEs. This is an extension of previous researches using asymptotic expansions to obtain the control variates for such general models. Moreover, in our control variate method, the regression estimators can be chosen for each number of jump times with a stratified sampling, and improve the efficiency of the variance reduction. This paper also provides the asymptotic bias and variance of our method in terms of its terminal time and a small noise parameter used in an asymptotic expansion method. Keywords: Control variate; Asymptotic expansion; Multi-asset options; Monte Carlo simulation; Stratified sampling (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:258:y:2017:i:1:p:358-371 DOI: 10.1016/j.ejor.2016.08.060 Access Statistics for this article European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati More articles in European Journal of Operational Research from Elsevier |
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