Efficient basket Monte Carlo option pricing via a simple analytical approximation

2013-05-01
Korn, Ralf
Zeytun, Serkan
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.
JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

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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.