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Stacked Monte Carlo for option pricing

Antoine Jacquier, Emma R. Malone and Mugad Oumgari

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Abstract: We introduce a stacking version of the Monte Carlo algorithm in the context of option pricing. Introduced recently for aeronautic computations, this simple technique, in the spirit of current machine learning ideas, learns control variates by approximating Monte Carlo draws with some specified function. We describe the method from first principles and suggest appropriate fits, and show its efficiency to evaluate European and Asian Call options in constant and stochastic volatility models.

New Economics Papers: this item is included in nep-big, nep-cmp and nep-sea
Date: 2019-03
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