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Denoised Monte Carlo for option pricing and Greeks estimation

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  • Andrzej Daniluk
  • Evgeny Lakshtanov
  • Rafal Muchorski

Abstract

We present a novel technique of Monte Carlo error reduction that finds direct application in option pricing and Greeks estimation. The method is applicable to any LSV modelling framework and concerns a broad class of payoffs, including path-dependent and multi-asset cases. Most importantly, it allows to reduce the Monte Carlo error even by an order of magnitude, which is shown in several numerical examples.

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  • Andrzej Daniluk & Evgeny Lakshtanov & Rafal Muchorski, 2024. "Denoised Monte Carlo for option pricing and Greeks estimation," Papers 2402.12528, arXiv.org.
    • Handle: RePEc:arx:papers:2402.12528
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    References listed on IDEAS

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    1. Mark Broadie & Paul Glasserman & Steven Kou, 1997. "A Continuity Correction for Discrete Barrier Options," Mathematical Finance, Wiley Blackwell, vol. 7(4), pages 325-349, October.
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