Malliavin Monte Carlo Greeks for jump diffusions (Q2576959): Difference between revisions

The objective of this paper is to derive stochastic weights for calculating the Greeks, i.e., the price sensitivities with respect to the model parameters, in a jump diffusion setting where the jump amplitude is deterministic. In particular, jump diffusions are considered, that are the functions of continuous and jump components, where continuous component is a Markov diffusion that has bounded continuous derivatives of drift and diffusion coefficients and jump component is driven by the Poisson process and does not depend on the initial value. This includes stochastic volatility models and the jump diffusion Vasicek model for interest rates. Malliavin calculus for simple Lévy processes is applied and slightly extended. Some numerical results are presented.