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An algorithm for winning coalitions in indirect control of corporations

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  • Nando Prati
  • Enrico Denti

Abstract

We describe in this paper a variance reduction method based on control variates. The technique uses the fact that, if all stochastic assets but one are replaced in the payoff function by their mean, the resulting integral can most often be evaluated in closed form. We exploit this idea by applying the univariate payoff as control variate and develop a general Monte Carlo procedure, called Mean Monte Carlo (MMC). The method is then tested on a variety of multifactor options and compared to other Monte Carlo approaches or numerical techniques. The method is of easy and broad applicability and gives good results especially for low to medium dimension and in high volatility environments. Copyright Springer-Verlag Italia 2001

Suggested Citation

  • Nando Prati & Enrico Denti, 2001. "An algorithm for winning coalitions in indirect control of corporations," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 24(2), pages 153-158, November.
    • Handle: RePEc:spr:decfin:v:24:y:2001:i:2:p:153-158
    DOI: 10.1007/s102030170005
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    References listed on IDEAS

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    1. Gambarelli, Gianfranco & Owen, Guillermo, 1994. "Indirect Control of Corporations," International Journal of Game Theory, Springer;Game Theory Society, vol. 23(4), pages 287-302.
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    Cited by:

    1. Enrico Denti & Nando Prati, 2004. "Relevance of winning coalitions in indirect control of corporations," Theory and Decision, Springer, vol. 56(1), pages 183-192, April.

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    More about this item

    Keywords

    Mathematics Subject Classification (2000): 91A12; Journal of Economic Literature Classification: C71; D21;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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