La simulation de Monte Carlo: forces et faiblesses (avec applications Visual Basic et Matlab et présentation d’une nouvelle méthode QMC)

François-Éric Racicot () and Raymond Théoret ()
Additional contact information
Raymond Théoret: Département de stratégie des affaires, Université du Québec (Montréal)

RePAd Working Paper Series from Département des sciences administratives, UQO

Abstract: Monte Carlo simulation has an advantage upon the binomial tree as it can take into account the multidimensions of a problem. However it convergence speed is slower. In this article, we show how this method may be improved by various means: antithetic variables, control variates and low discrepancy sequences: Faure, Sobol and Halton sequences. We show how to compute the standard deviation of a Monte Carlo simulation when the payoffs of a claim, like a contingent claim, are nonlinear. In this case, we must compute this standard deviation by doing a great number of repeated simulations such that we arrive at a normal distribution of the results. The mean of the means of these simulations is then a good estimator of the wanted price. We also show how to combine Halton numbers with antithetic variables to improve the convergence of a QMC. That is our new version of QMC which is then well named because the result varies from one simulation to the other in our version of the QMC while the result is fixed (not random) in a classical QMC, like in the binomial tree.

Keywords: Financial engineering; derivatives; Monte Carlo simulation; low discrepancy sequences. (search for similar items in EconPapers)
JEL-codes: G12 G13 G33 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2006-04-10
New Economics Papers: this item is included in nep-bec, nep-cmp, nep-ecm, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.repad.org/ca/qc/uq/uqo/dsa/articlemontecarlo.pdf First version, 2006 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.repad.org:80 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pqs:wpaper:052006

Access Statistics for this paper

More papers in RePAd Working Paper Series from Département des sciences administratives, UQO Contact information at EDIRC.
Bibliographic data for series maintained by Christian Calmes ().