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Analysing multi-level Monte Carlo for options with non-globally Lipschitz payoff

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  • Michael Giles
  • Desmond Higham
  • Xuerong Mao

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  • Michael Giles & Desmond Higham & Xuerong Mao, 2009. "Analysing multi-level Monte Carlo for options with non-globally Lipschitz payoff," Finance and Stochastics, Springer, vol. 13(3), pages 403-413, September.
    • Handle: RePEc:spr:finsto:v:13:y:2009:i:3:p:403-413
    DOI: 10.1007/s00780-009-0092-1
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    References listed on IDEAS

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    1. Higham,Desmond J., 2004. "An Introduction to Financial Option Valuation," Cambridge Books, Cambridge University Press, number 9780521547574, September.
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    Cited by:

    1. Michael B. Giles & Kristian Debrabant & Andreas Ro{ss}ler, 2013. "Analysis of multilevel Monte Carlo path simulation using the Milstein discretisation," Papers 1302.4676, arXiv.org, revised Jun 2019.
    2. Michael B. Giles & Abdul-Lateef Haji-Ali & Jonathan Spence, 2023. "Efficient Risk Estimation for the Credit Valuation Adjustment," Papers 2301.05886, arXiv.org, revised May 2024.
    3. Christian Bayer & Chiheb Ben Hammouda & Raul Tempone, 2020. "Multilevel Monte Carlo with Numerical Smoothing for Robust and Efficient Computation of Probabilities and Densities," Papers 2003.05708, arXiv.org, revised Oct 2023.
    4. Ahmed Kebaier & J'er^ome Lelong, 2015. "Coupling Importance Sampling and Multilevel Monte Carlo using Sample Average Approximation," Papers 1510.03590, arXiv.org, revised Jul 2017.
    5. Mike Giles & Lukasz Szpruch, 2012. "Multilevel Monte Carlo methods for applications in finance," Papers 1212.1377, arXiv.org.
    6. Ahmed Kebaier & Jérôme Lelong, 2017. "Coupling Importance Sampling and Multilevel Monte Carlo using Sample Average Approximation," Working Papers hal-01214840, HAL.
    7. Andrei Cozma & Matthieu Mariapragassam & Christoph Reisinger, 2015. "Convergence of an Euler scheme for a hybrid stochastic-local volatility model with stochastic rates in foreign exchange markets," Papers 1501.06084, arXiv.org, revised Oct 2016.
    8. Andrei Cozma & Christoph Reisinger, 2017. "Strong convergence rates for Euler approximations to a class of stochastic path-dependent volatility models," Papers 1706.07375, arXiv.org, revised Oct 2018.
    9. Mouna Ben Derouich & Ahmed Kebaier, 2022. "Interpolated Drift Implicit Euler MLMC Method for Barrier Option Pricing and application to CIR and CEV Models," Papers 2210.00779, arXiv.org, revised Sep 2024.
    10. Hideyuki Tanaka & Toshihiro Yamada, 2013. "Strong Convergence for Euler-Maruyama and Milstein Schemes with Asymptotic Method (Forthcoming in "International Journal of Theoretical and Applied Finance")," CARF F-Series CARF-F-333, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    11. Ben Alaya Mohamed & Kebaier Ahmed, 2014. "Multilevel Monte Carlo for Asian options and limit theorems," Monte Carlo Methods and Applications, De Gruyter, vol. 20(3), pages 181-194, September.
    12. Dong An & Noah Linden & Jin-Peng Liu & Ashley Montanaro & Changpeng Shao & Jiasu Wang, 2020. "Quantum-accelerated multilevel Monte Carlo methods for stochastic differential equations in mathematical finance," Papers 2012.06283, arXiv.org, revised Jun 2021.
    13. Michael B. Giles & Abdul-Lateef Haji-Ali, 2022. "Multilevel Path Branching for Digital Options," Papers 2209.03017, arXiv.org, revised Jun 2024.
    14. Hoel Håkon & von Schwerin Erik & Szepessy Anders & Tempone Raúl, 2014. "Implementation and analysis of an adaptive multilevel Monte Carlo algorithm," Monte Carlo Methods and Applications, De Gruyter, vol. 20(1), pages 1-41, March.
    15. Benjamin Jourdain & Mohamed Sbai, 2013. "High order discretization schemes for stochastic volatility models," Post-Print hal-00409861, HAL.
    16. Desmond J. Higham, 2015. "An Introduction to Multilevel Monte Carlo for Option Valuation," Papers 1505.00965, arXiv.org.
    17. Ahmed Kebaier & Jérôme Lelong, 2018. "Coupling Importance Sampling and Multilevel Monte Carlo using Sample Average Approximation," Post-Print hal-01214840, HAL.
    18. Andrei Cozma & Christoph Reisinger, 2017. "Strong order 1/2 convergence of full truncation Euler approximations to the Cox-Ingersoll-Ross process," Papers 1704.07321, arXiv.org, revised Oct 2018.
    19. Jean-Francois Chassagneux & Antoine Jacquier & Ivo Mihaylov, 2014. "An explicit Euler scheme with strong rate of convergence for financial SDEs with non-Lipschitz coefficients," Papers 1405.3561, arXiv.org, revised Apr 2016.
    20. Ahmed Kebaier & Jérôme Lelong, 2018. "Coupling Importance Sampling and Multilevel Monte Carlo using Sample Average Approximation," Methodology and Computing in Applied Probability, Springer, vol. 20(2), pages 611-641, June.

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    More about this item

    Keywords

    Barrier option; Complexity; Digital option; Euler–Maruyama; Lookback option; Path-dependent option; Statistical error; Strong error; Weak error; 65C05; 60H10; C15; C63;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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