Reducing the Variance of Likelihood Ratio Greeks with Monte Carlo

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dc.creatorCapriotti, Luca
dc.date2008-08-18
dc.date.accessioned2026-07-07T09:57:48Z
dc.date.available2026-07-07T09:57:48Z
dc.descriptionWe investigate the use of Antithetic Variables, Control Variates and Importance Sampling to reduce the statistical errors of option sensitivities calculated with the Likelihood Ratio Method in Monte Carlo. We show how Antithetic Variables solve the well-known problem of the divergence of the variance of Delta for short maturities and small volatilities. With numerical examples within a Gaussian Copula framework, we show how simple Control Variates and Importance Sampling strategies provide computational savings up to several orders of magnitude.
dc.description4 pages, 2 figures
dc.identifierhttps://arxiv.org/abs/0808.2332
dc.identifierhttp://arxiv.org/abs/0808.2332
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/167480
dc.subjectData Analysis, Statistics and Probability
dc.subjectOther Condensed Matter
dc.titleReducing the Variance of Likelihood Ratio Greeks with Monte Carlo
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