A general control variate method for option pricing under Levy processes

被引:25
|
作者
Dingec, Kemal Dincer [1 ]
Hormann, Wolfgang [1 ]
机构
[1] Bogazici Univ, Dept Ind Engn, TR-34342 Bebek, Turkey
关键词
Finance; Option pricing; Levy processes; Monte Carlo simulation; Control variate; Numerical inversion; MONTE CARLO METHOD; COMPUTER METHODS; ASIAN OPTIONS; GAMMA;
D O I
10.1016/j.ejor.2012.03.046
中图分类号
C93 [管理学];
学科分类号
12 ; 1201 ; 1202 ; 120202 ;
摘要
We present a general control variate method for simulating path dependent options under Levy processes. It is based on fast numerical inversion of the cumulative distribution functions and exploits the strong correlation of the payoff of the original option and the payoff of a similar option under geometric Brownian motion. The method is applicable for all types of Levy processes for which the probability density function of the increments is available in closed form. Numerical experiments confirm that our method achieves considerable variance reduction for different options and Levy processes. We present the applications of our general approach for Asian, lookback and barrier options under variance gamma, normal inverse Gaussian, generalized hyperbolic and Meixner processes. (C) 2012 Elsevier B.V. All rights reserved.
引用
收藏
页码:368 / 377
页数:10
相关论文
共 50 条
  • [1] Lattice Approach for Option Pricing under Levy Processes
    Muroi, Yoshifumi
    Suda, Shintaro
    JOURNAL OF DERIVATIVES, 2023, 31 (01): : 34 - 48
  • [2] The quintessential option pricing formula under Levy processes
    Agliardi, Rossella
    APPLIED MATHEMATICS LETTERS, 2009, 22 (10) : 1626 - 1631
  • [3] A general control variate method for Levy models in finance
    Shiraya, Kenichiro
    Uenishi, Hiroki
    Yamazaki, Akira
    EUROPEAN JOURNAL OF OPERATIONAL RESEARCH, 2020, 284 (03) : 1190 - 1200
  • [4] A martingale control variate method for option pricing with stochastic volatility
    Fouque, Jean-Pierre
    Han, Chuan-Hsiang
    ESAIM - Probability and Statistics, 2007, 11 : 40 - 54
  • [5] Simulation of Levy processes and option pricing
    Dia, El Hadj Aly
    JOURNAL OF COMPUTATIONAL FINANCE, 2013, 17 (02) : 41 - 69
  • [6] Exotic options pricing under special Levy process models: A biased control variate method approach
    Jia, Jiayi
    Lai, Yongzeng
    Li, Lin
    Tan, Vinna
    FINANCE RESEARCH LETTERS, 2020, 34
  • [7] Specification analysis of VXX option pricing models under Levy processes
    Cao, Jiling
    Ruan, Xinfeng
    Su, Shu
    Zhang, Wenjun
    JOURNAL OF FUTURES MARKETS, 2021, 41 (09) : 1456 - 1477
  • [8] Option pricing under some Levy-like stochastic processes
    Agliardi, Rossella
    APPLIED MATHEMATICS LETTERS, 2011, 24 (04) : 572 - 576
  • [9] The return barrier and return timer option with pricing under Levy processes
    Kirkby, Justin Lars
    Aguilar, Jean-Philippe
    EXPERT SYSTEMS WITH APPLICATIONS, 2023, 233
  • [10] Efficient multiple control variate method with applications to exotic option pricing
    Zhang, Suhua
    A, Chunxiang
    Lai, Yongzeng
    COMMUNICATIONS IN STATISTICS-THEORY AND METHODS, 2021, 50 (06) : 1275 - 1294