Efficient Numerical Inversion for Financial Simulations

Gerhard Derflinger (), Wolfgang Hörmann (), Josef Leydold () and Halis Sak ()
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Gerhard Derflinger: WU (Vienna University of Economics and Business), Department of Statistics and Mathematics

A chapter in Monte Carlo and Quasi-Monte Carlo Methods 2008, 2009, pp 297-304 from Springer

Abstract: Abstract Generating samples from generalized hyperbolic distributions and non-central chi-square distributions by inversion has become an important task for the simulation of recent models in finance in the framework of (quasi-) Monte Carlo. However, their distribution functions are quite expensive to evaluate and thus numerical methods like root finding algorithms are extremely slow. In this paper we demonstrate how our new method based on Newton interpolation and Gauss-Lobatto quadrature can be utilized for financial applications. Its fast marginal generation times make it competitive, even for situations where the parameters are not always constant.

Keywords: Probability Density Function; Cumulative Distribution Function; Quantile Function; Target Distribution; Inversion Algorithm (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-04107-5_18

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DOI: 10.1007/978-3-642-04107-5_18

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