A generalisation of Malliavin weighted scheme for fast computation of the Greeks

Eric Benhamou

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper presented a new technique for the simulation of the Greeks (i.e. price sensitivities to parameters), efficient for strongly discontinuous payoff options. The use of Malliavin calculus, by means of an integration by parts, enables to shift the differentiation operator from the payoff function to the diffusion kernel, introducing a weighting function (Fournie et al. (1999)). Expressing the weighting function as a Skorohod integral, we show how to characterize the integrand with necessary and sufficient conditions, giving a complete description of weighting function solutions. Interestingly, for adapted process, the Skorohod integral turns to be the classical Ito integral.

Keywords: Monte-Carlo; quasi-Monte Carlo; Greeks; Malliavin calculus; Wiener chaos (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2000-04-01
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:119105

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