Variance reduction techniques for basket option

Haijun Yang; Sa An

doi:10.1109/ICMSS.2010.5578221

Variance reduction techniques for basket option

Haijun Yang^*
, Sa An

^*Corresponding author for this work

School of Economics and Management

Beihang University

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › peer-review

Abstract

This paper prices the basket option by Monte Carlo simulation. With the comparison of the methods used as variance reduction techniques, to find the optimal way for reducing variance for basket option.The methods include antithetic variates, control variates,importance sampling,stratified sampling,moment matching, Latin hypercube sampling and combined methods. Numerical results indicate that an appropriate combination of importance sampling and stratified sampling can obtain the largest variance reductions when estimating the basket option.

Original language	English
Title of host publication	2010 International Conference on Management and Service Science, MASS 2010
DOIs	https://doi.org/10.1109/ICMSS.2010.5578221
State	Published - 2010
Event	2010 International Conference on Management and Service Science, MASS 2010 - Wuhan, China Duration: 24 Aug 2010 → 26 Aug 2010

Publication series

Name	2010 International Conference on Management and Service Science, MASS 2010

Conference

Conference	2010 International Conference on Management and Service Science, MASS 2010
Country/Territory	China
City	Wuhan
Period	24/08/10 → 26/08/10

Keywords

Basket option
Importance sampling
Monte Carlo
Stratified sampling
Variance reduction techniques

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10.1109/ICMSS.2010.5578221

Cite this

@inproceedings{be7918ed81354c959537371fc9f07871,

title = "Variance reduction techniques for basket option",

abstract = "This paper prices the basket option by Monte Carlo simulation. With the comparison of the methods used as variance reduction techniques, to find the optimal way for reducing variance for basket option.The methods include antithetic variates, control variates,importance sampling,stratified sampling,moment matching, Latin hypercube sampling and combined methods. Numerical results indicate that an appropriate combination of importance sampling and stratified sampling can obtain the largest variance reductions when estimating the basket option.",

keywords = "Basket option, Importance sampling, Monte Carlo, Stratified sampling, Variance reduction techniques",

author = "Haijun Yang and Sa An",

year = "2010",

doi = "10.1109/ICMSS.2010.5578221",

language = "英语",

isbn = "9781424453269",

series = "2010 International Conference on Management and Service Science, MASS 2010",

booktitle = "2010 International Conference on Management and Service Science, MASS 2010",

note = "2010 International Conference on Management and Service Science, MASS 2010 ; Conference date: 24-08-2010 Through 26-08-2010",

}

Yang, H & An, S 2010, Variance reduction techniques for basket option. in 2010 International Conference on Management and Service Science, MASS 2010., 5578221, 2010 International Conference on Management and Service Science, MASS 2010, 2010 International Conference on Management and Service Science, MASS 2010, Wuhan, China, 24/08/10. https://doi.org/10.1109/ICMSS.2010.5578221

TY - GEN

T1 - Variance reduction techniques for basket option

AU - Yang, Haijun

AU - An, Sa

PY - 2010

Y1 - 2010

N2 - This paper prices the basket option by Monte Carlo simulation. With the comparison of the methods used as variance reduction techniques, to find the optimal way for reducing variance for basket option.The methods include antithetic variates, control variates,importance sampling,stratified sampling,moment matching, Latin hypercube sampling and combined methods. Numerical results indicate that an appropriate combination of importance sampling and stratified sampling can obtain the largest variance reductions when estimating the basket option.

AB - This paper prices the basket option by Monte Carlo simulation. With the comparison of the methods used as variance reduction techniques, to find the optimal way for reducing variance for basket option.The methods include antithetic variates, control variates,importance sampling,stratified sampling,moment matching, Latin hypercube sampling and combined methods. Numerical results indicate that an appropriate combination of importance sampling and stratified sampling can obtain the largest variance reductions when estimating the basket option.

KW - Basket option

KW - Importance sampling

KW - Monte Carlo

KW - Stratified sampling

KW - Variance reduction techniques

UR - https://www.scopus.com/pages/publications/78649395301

U2 - 10.1109/ICMSS.2010.5578221

DO - 10.1109/ICMSS.2010.5578221

M3 - 会议稿件

AN - SCOPUS:78649395301

SN - 9781424453269

T3 - 2010 International Conference on Management and Service Science, MASS 2010

BT - 2010 International Conference on Management and Service Science, MASS 2010

T2 - 2010 International Conference on Management and Service Science, MASS 2010

Y2 - 24 August 2010 through 26 August 2010

ER -

Variance reduction techniques for basket option

Abstract

Publication series

Conference

Keywords

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