Monte Carlo methods in financial engineering
American optiondiscretizationEuropean optionMonte Carlo methodMonte Carlo simulationquasi-Monte Carlorandom numberrisk managementsample pathsensitivityvariance reduction technique
Applications of statistics to actuarial sciences and financial mathematics (62P05) Monte Carlo methods (65C05) Random number generation in numerical analysis (65C10) Research exposition (monographs, survey articles) pertaining to game theory, economics, and finance (91-02) Economic growth models (91B62) Stochastic models in economics (91B70) Numerical methods (including Monte Carlo methods) (91G60)
This recent book is a valuable addition to the references devoted to Monte Carlo methods. It is an outgrowth of lecture notes the author has used over several years at different universities and is intended to serve graduate students in financial engineering, researchers interested in the application of Monte Carlo methods in finance, and practitioners implementing models in industry. Despite the fact that the audience comes from different fields of activity and with different prerequisites, the author succeeded in choosing the most actual topics in financial engineering and in presenting them in an appropriate way by keeping a suitable balance between mathematical rigour and an audience friendly language. The text is divided into nine chapters. In essence, Chapters 1 to 3 are concerned with running simulations whereas Chapters 4 to 6 deal with ways of running them better. Chapters 7 to 9 address topics specific to the application of Monte Carlo methods in finance. To help the reader, three appendices provide basic results on convergence concepts, stochastic calculus, and the term structure of interest rates. A large bibliography of 358 entries accompanies this text. In short, the reader will find this book extremely lucid and useful. Contents: Foundations, Generating random numbers and random variables, Generating sample paths, Variance reduction techniques, Quasi-Monte Carlo, Discretization methods, Estimating sensitivities, Pricing American options, Applications in risk management.
- Analytical approximations for prices of swap rate dependent embedded options in insurance products
- A mixed PDE/Monte-Carlo method for stochastic volatility models
- Single name credit default swaptions meet single sided jump models
- Testing diffusion processes for non-stationarity
- Optimization strategies in credit portfolio management
- Auto-static for the people: risk-minimizing hedges of barrier options
- Revisit of stochastic mesh method for pricing American options
- Computing option price for Lévy process with fuzzy parameters
- Recovery process model for two companies
- Top-down approaches for integrated risk management: how accurate are they?
- A general control variate method for option pricing under Lévy processes
- Monte Carlo methods for security pricing
- Pricing turbo warrants under mixed-exponential jump diffusion model
- On some properties of reflected skew Brownian motions and applications to dispersion in heterogeneous media
- Importance sampling for Kolmogorov backward equations
- Asymptotic distribution of the EPMS estimator for financial derivatives pricing
- An importance sampling-based smoothing approach for quasi-Monte Carlo simulation of discrete barrier options
- Weak Milstein scheme without commutativity condition and its error bound
- On the efficient simulation of the left-tail of the sum of correlated log-normal variates
- Using forward Monte-Carlo simulation for the valuation of American barrier options
- A hybrid Monte Carlo acceleration method of pricing basket options based on splitting
- Likelihood computation in the normal-gamma stochastic frontier model
- Quasi-Monte Carlo point sets with small t-values and WAFOM
- Conditional quasi-Monte Carlo methods and dimension reduction for option pricing and hedging with discontinuous functions
- Dynamic portfolio choices by simulation-and-regression: revisiting the issue of value function vs. portfolio weight recursions
- Generating random variates from PDF of Gauss-Markov processes with a reflecting boundary
- Implicit American Monte Carlo methods for nonlinear functional of future portfolio value
- Approximation of eigenvalues of spot cross volatility matrix with a view toward principal component analysis
- Replicating portfolio approach to capital calculation
- Valuation of variable long-term care annuities with guaranteed lifetime withdrawal benefits: a variance reduction approach
- A general control variate method for multi-dimensional SDEs: an application to multi-asset options under local stochastic volatility with jumps models in finance
- Optimal harvesting for a stochastic predator-prey model with S-type distributed time delays
- Asymptotics for the Euler-discretized Hull-White stochastic volatility model
- Efficient simulations for a Bernoulli mixture model of portfolio credit risk
- Approximations for weighted Kolmogorov-Smirnov distributions via boundary crossing probabilities
- An efficient approach based on radial basis functions for solving stochastic fractional differential equations
- Market inconsistencies of market-consistent European life insurance economic valuations: pitfalls and practical solutions
- Runoff or redesign? Alternative guarantees and new business strategies for participating life insurance
- Allowance for surplus funds under Solvency II: adequate reflection of risk sharing between policyholders and shareholders in a risk-based solvency framework?
- Variance reduction in Monte Carlo estimators via empirical variance minimization
- Exact simulation of the Ornstein-Uhlenbeck driven stochastic volatility model
- On the implementation of multilevel Monte Carlo simulation of the stochastic volatility and interest rate model using multi-GPU clusters
- The use of power numeraires in option pricing
- Relationship between least squares Monte Carlo and approximate linear programming
- Pricing multi-asset option problems: a Chebyshev pseudo-spectral method
- An integral representation of elasticity and sensitivity for stochastic volatility models
- Nonparametric quantile estimation using importance sampling
- Monte Carlo methods for uniform approximation on periodic Sobolev spaces with mixed smoothness
- Applications of generalized likelihood ratio method to distribution sensitivities and steady-state simulation
- Pricing barrier options in the Heston model using the Heath-Platen estimator
- Improving the efficiency of fully Bayesian optimal design of experiments using randomised quasi-Monte Carlo
- Comparison of least squares Monte Carlo methods with applications to energy real options
- An FEM-MLMC algorithm for a moving shutter diffraction in time stochastic model
- Stochastic and quasistochastic computations
- Dynamic importance sampling for uniformly recurrent Markov chains
- Path integral pricing of wasabi option in the Black-Scholes model
- Modelling hepatitis C virus infection and the development of hepatocellular carcinoma
- Chebyshev reduced basis function applied to option valuation
- A discrete optimality system for an optimal harvesting problem
- Modeling asset price under two-factor Heston model with jumps
- CAM stochastic volatility model for option pricing
- Solvency II, or how to sweep the downside risk under the carpet
- Efficient Monte Carlo simulation of security prices
- Stochastic comparisons of symmetric sampling designs
- \(\varepsilon\)-strong simulation of the Brownian path
- Taylor series approximations to expected utility and optimal portfolio choice
- Brownian meanders, importance sampling and unbiased simulation of diffusion extremes
- On the stability the least squares Monte Carlo
- Pricing and hedging Asian basket options with quasi-Monte Carlo simulations
- Analysis of hepatitis C viral dynamics using Latin hypercube sampling
- Exact and high-order discretization schemes for Wishart processes and their affine extensions
- Mixing Monte-Carlo and partial differential equations for pricing options
- On the distribution of integration error by randomly-shifted lattice rules
- The monotone case approach for the solution of certain multidimensional optimal stopping problems
- Volatility swaps and volatility options on discretely sampled realized variance
- Practical policy iteration: generic methods for obtaining rapid and tight bounds for Bermudan exotic derivatives using Monte Carlo simulation
- Effective sub-simulation-free upper bounds for the Monte Carlo pricing of callable derivatives and various improvements to existing methodologies
- Adaptive stratified Monte Carlo algorithm for numerical computation of integrals
- Radial basis function partition of unity methods for pricing vanilla basket options
- A regression-based smoothing spline Monte Carlo algorithm for pricing American options in discrete time
- General multilevel Monte Carlo methods for pricing discretely monitored Asian options
- Implementing de-biased estimators using mixed sequences
- Estimation of a CIR process with jumps using a closed form approximation likelihood under a strong approximation of order 1
- Numerical performance of optimized Frolov lattices in tensor product reproducing kernel Sobolev spaces
- Fast simulation of the customer blocking probability in queueing networks with multicast access
- Convergence, non-negativity and stability of a new lobatto IIIC-Milstein method for a pricing option approach based on stochastic volatility model
- A Kalman particle filter for online parameter estimation with applications to affine models
- Numerical solution of stochastic Itô-Volterra integral equations based on Bernstein multi-scaling polynomials
- Fast incremental expectation maximization for finite-sum optimization: nonasymptotic convergence
- Control variate selection for Monte Carlo integration
- Socially responsible merchant operations: comparison of shutdown-averse CVaR and anticipated regret policies
- Sensitivity estimation of conditional value at risk using randomized quasi-Monte Carlo
- Multilevel Monte Carlo estimators for elliptic PDEs with Lévy-type diffusion coefficient
- Surrender contagion in life insurance
- Efficient simulation of \(p\)-tempered \(\alpha\)-stable OU processes
- Variance reduction for Metropolis-Hastings samplers
- Quantum algorithms for numerical differentiation of expected values with respect to parameters
- Variance reduction for additive functionals of Markov chains via martingale representations
- Stochastic representation of FGM copulas using multivariate Bernoulli random variables
- Estimating option Greeks under the stochastic volatility using simulation
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