Likelihood ratio gradient estimation for Meixner distribution and Lévy processes

Reiichiro Kawai ()

Computational Statistics, 2012, vol. 27, issue 4, 739-755

Abstract: We address the problem of gradient estimation with respect to four characterizing parameters of the Meixner distribution and Lévy process. With the help of the explicit marginal probability density function, the likelihood ratio method is directly applicable, while unbiased estimators may contain infinite random series in their score function. We quantify the estimator bias arising when the infinite series is truncated to finite term. We further propose a substantially simple exact simulation method for the Meixner distribution, based on acceptance-rejection sampling and the Esscher density transform. Numerical results are presented in the context of financial Greeks to illustrate the effectiveness of our formulas along with bias estimates. Copyright Springer-Verlag 2012

Keywords: Acceptance-rejection sampling; Esscher density transform; Greeks; Lévy process; likelihood ratio method; Meixner distribution; Meixner process; Monte Carlo simulation (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:compst:v:27:y:2012:i:4:p:739-755

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DOI: 10.1007/s00180-011-0288-7

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