Malliavin Calculus applied to finance

Miquel Montero () and Arturo Kohatsu-Higa

Physica A: Statistical Mechanics and its Applications, 2003, vol. 320, issue C, 548-570

Abstract: In this article, we give a brief informal introduction to Malliavin Calculus for newcomers. We apply these ideas to the simulation of Greeks in Finance. First to European-type options where formulas can be computed explicitly and therefore can serve as testing ground. Later, we study the case of Asian options where close formulas are not available, and we also open the view for including more exotic derivatives. The Greeks are computed through Monte Carlo simulation.

Keywords: Malliavin Calculus; Stochastic processes; Financial derivatives; Greeks; Monte Carlo methods (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:320:y:2003:i:c:p:548-570

DOI: 10.1016/S0378-4371(02)01531-5

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