Quasi-Monte Carlo Method in Pricing Barrier Options

Tomasz Oczadły
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Tomasz Oczadły: Wrocław University of Economics, Poland

Chapter 10 in FindEcon Monograph Series: Advances in Financial Market Analysis, 2006, vol. 2, pp 169-181 from University of Lodz

Abstract: Chapter 10 shows the basic idea of quasi-Monte Carlo methods. These methods differ from ordinary Monte Carlo method in that they make no attempt to mimic randomness. They are based on the idea that random Monte Carlo techniques can often be improved by replacing the underlying source of random numbers with a more uniformly distributed deterministic sequence. Low-discrepancy methods have the potential to accelerate convergence under appropriate conditions. In an example using randomized quasi-Monte Carlo methods it was possible to achieve faster convergence of the option price.

Keywords: Monte Carlo method; Options pricing; Financial risk management (search for similar items in EconPapers)
JEL-codes: C01 E02 F00 G00 (search for similar items in EconPapers)
Date: 2006
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