Variance Reduction for Asian Options under a General Model Framework
Kemal Dinçer Dingeç,
Halis Sak and
Wolfgang Hörmann
Review of Finance, 2015, vol. 19, issue 2, 907-949
Abstract:
We present a new variance reduction method for Asian options under a general model framework. The three special cases we consider are Lévy processes, Heston stochastic volatility, and regime switching models. The proposed method combines a very effective control variate with conditional Monte Carlo. While the control variate can be used for any model allowing the numerical computation of the multivariate characteristic function of the log-return vector, conditional Monte Carlo is based on the unified representation of the three models. Computational results confirm that the new method performs better than available control variate methods.
Date: 2015
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