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Investment certificates pricing using a Quasi-Monte Carlo framework: Case-studies based on the Italian market

Author

Listed:
  • Anna Bottasso

    (Department of Economics, University of Genoa, Genoa, Italy)

  • Michelangelo Fusaro

    (��Quantitative Financial Analyst and AIAF/AIFIRM Member, Italy)

  • Pier Giuseppe Giribone

    (Department of Economics, University of Genoa, Genoa, Italy‡Financial Engineering, BPER Banca, Modena, Italy)

  • Alessio Tissone

    (��Quantitative Financial Analyst and AIAF/AIFIRM Member, Italy)

Abstract

The Monte Carlo method, thanks to its flexibility in designing even extremely complex payoffs, is assuming an increasingly important role in quantitative analysis. Its main limitation is the high computational cost linked to its modest speed of convergence to the fair value of the product. One of the best-known statistical techniques is to replace the random number generator with “low discrepancy†deterministic numerical sequences, producing a Quasi-Monte Carlo. Through its implementation for the analysis of three investment certificates featuring different characteristics and different stochastic processes used for the underlying simulation, the study demonstrates the possibility of achieving interesting results in terms of performance even for pricing these structured products ever more popular in the financial industry.

Suggested Citation

  • Anna Bottasso & Michelangelo Fusaro & Pier Giuseppe Giribone & Alessio Tissone, 2023. "Investment certificates pricing using a Quasi-Monte Carlo framework: Case-studies based on the Italian market," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 1-39, September.
    • Handle: RePEc:wsi:ijfexx:v:10:y:2023:i:03:n:s2424786323500214
    DOI: 10.1142/S2424786323500214
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