A general control variate method for Lévy models in finance

Kenichiro Shiraya, Hiroki Uenishi and Akira Yamazaki

European Journal of Operational Research, 2020, vol. 284, issue 3, 1190-1200

Abstract: This study proposes a new control variate method for Lévy models in finance. Our method generates a process of the control variate whose initial and terminal values coincide with those of the target Lévy model process, with both processes being driven by the same Brownian motion in the simulation. These features efficiently reduce the variance of the Monte Carlo simulation. As a typical application of this method, we provide the calculation scheme for pricing path-dependent exotic options.

Keywords: Control variate; Monte Carlo simulation; Lévy process; Path-dependent options (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:284:y:2020:i:3:p:1190-1200

DOI: 10.1016/j.ejor.2020.01.043

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