The Weighted Variance Minimization in Jump-Diffusion Stochastic Volatility Models

Anatoly Gormin () and Yuri Kashtanov ()
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Anatoly Gormin: Saint-Petersburg State University, Faculty of Mathematics and Mechanics, Department of Statistical Simulation

A chapter in Monte Carlo and Quasi-Monte Carlo Methods 2008, 2009, pp 383-394 from Springer

Abstract: Abstract The Monte Carlo method is applied to estimation of options in the case of a stochastic volatility model with jumps. An option contract has a number of parameters like a strike, an exercise date, etc. Estimators of option prices with different values of its parameters are constructed on the same trajectories of the underlying asset price process. The problem of minimization of the weighted sum of their variances is considered. Optimal estimators with minimal weighted variance are pointed out. Their approximations are applied to variance reduction.

Keywords: Option Price; Weighted Variance; Importance Sampling; Variance Reduction; Stochastic Volatility Model (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_24

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DOI: 10.1007/978-3-642-04107-5_24

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