Efficient basket Monte Carlo option pricing via a simple analytical approximation

Date

2013-05-01

Author

Korn, Ralf
Zeytun, Serkan

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

163
views

0
downloads

We present a new valuation method for basket options that is based on a limiting approximation of the arithmetic mean by the geometric mean. Using this approximation combined with a new analytical pricing formula for an approximating geometric mean-based option as a control variate, excellent performance for Monte Carlo pricing in a control variate setting is obtained.

Subject Keywords

Options based on arithmetic averages, Sum of log-normal distributions, Monte Carlo method, Black-Scholes model, Variance reduction methods

URI

https://hdl.handle.net/11511/64531

Journal

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

DOI

https://doi.org/10.1016/j.cam.2012.10.035

Collections

Graduate School of Applied Mathematics, Article

Suggestions

OpenMETU
Core

Minimum Weighted Maximal Matching Problem in Trees Tural, Mustafa Kemal (2015-06-21) Given a weighted simple graph, the minimum weighted maximal matching (MWMM) problem is the problem of finding a maximal matching of minimum weight. The MWMM problem is NP-hard in general, but is polynomial-time solvable in some special classes of graphs. For instance, it has been shown that the MWMM problem can be solved in linear time in trees when all the edge weights are equal to one. We show that the convex hull of the incidence vectors of maximal matchings (i.e., the maximal matching polytope) in trees...
Maximal matching polytope in trees Tural, Mustafa Kemal (2016-06-01) Given a weighted simple graph, the minimum weighted maximal matching (MWMM) problem is the problem of finding a maximal matching of minimum weight. The MWMM problem is NP-hard in general, but is polynomial-time solvable in some special classes of graphs. For instance, it has been shown that the MWMM problem can be solved in linear time in trees when all the edge weights are equal to one. In this paper, we show that the convex hull of the incidence vectors of maximal matchings (the maximal matching polytope)...
A case-based decision support tool for bid mark-up estimation of international construction projects Dikmen Toker, İrem; Birgönül, Mustafa Talat (2007-11-01) The bid mark-up estimation is an unstructured decision problem that is usually solved by intuition. The aim of this paper is to present a decision support tool so that bid mark-up values may be estimated in a more systematic way. For this purpose, various factors that may affect the level of risk, opportunity and competition in a project option have been identified. Using the 95 cases obtained from the Turkish contractors working in international markets, a case-based reasoning model (CBR) has been develope...
Efficient multiplication in double-struck F sign3ℓm, m ≥ 1 and 5 ≤ ℓ ≤ 18 Cenk, Murat; Özbudak, Ferruh (2008-06-14) Using a method based on Chinese Remainder Theorem for polynomial multiplication and suitable reductions, we obtain an efficient multiplication method for finite fields of characteristic 3. Large finite fields of characteristic 3 are important for pairing based cryptography [3]. For 5 <= l <= 18, we show that our method gives canonical multiplication formulae over F-3lm for any m >= 1 with the best multiplicative complexity improving the bounds in [6]. We give explicit formula in the case F-36.97.
Sparse polynomial multiplication for lattice-based cryptography with small complexity Akleylek, Sedat; Alkim, Erdem; Tok, Zaliha Yuce (2016-02-01) In this paper, we propose efficient modular polynomial multiplication methods with applications in lattice-based cryptography. We provide a sparse polynomial multiplication to be used in the quotient ring (Z/pZ)[x]/(x(n) + 1). Then, we modify this algorithm with sliding window method for sparse polynomial multiplication. Moreover, the proposed methods are independent of the choice of reduction polynomial. We also implement the proposed algorithms on the Core i5-3210M CPU platform and compare them with numbe...

Citation Formats

R. Korn and S. Zeytun, “Efficient basket Monte Carlo option pricing via a simple analytical approximation,” JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS, pp. 48–59, 2013, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/64531.