Using Monte Carlo simulation and importance sampling to rapidly obtain jump-diffusion prices of continuous barrier options

Mark S. Joshi and Terence S. Leung

Journal of Computational Finance

Abstract: ABSTRACT The problem of pricing a continuous barrier option in a jump-diffusion model is studied. It is shown via an effective combination of importance sampling and analytic formulas that substantial speed ups can be achieved. These techniques are shown to be particularly effective for computing deltas.

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