The Annals of Applied Probability

Efficient Monte Carlo Simulation of Security Prices

Darrell Duffie and Peter Glynn

Full-text: Open access

Abstract

This paper provides an asymptotically efficient algorithm for the allocation of computing resources to the problem of Monte Carlo integration of continuous-time security prices. The tradeoff between increasing the number of time intervals per unit of time and increasing the number of simulations, given a limited budget of computer time, is resolved for first-order discretization schemes (such as Euler) as well as second- and higher-order schemes (such as those of Milshtein or Talay).

Article information

Source
Ann. Appl. Probab., Volume 5, Number 4 (1995), 897-905.

Dates
First available in Project Euclid: 19 April 2007

Permanent link to this document
https://projecteuclid.org/euclid.aoap/1177004598

Digital Object Identifier
doi:10.1214/aoap/1177004598

Mathematical Reviews number (MathSciNet)
MR1384358

Zentralblatt MATH identifier
0877.65099

JSTOR
links.jstor.org

Subjects
Primary: 65C05: Monte Carlo methods
Secondary: 90A09

Keywords
Monte Carlo simulation stochastic differential equations option pricing finance

Citation

Duffie, Darrell; Glynn, Peter. Efficient Monte Carlo Simulation of Security Prices. Ann. Appl. Probab. 5 (1995), no. 4, 897--905. doi:10.1214/aoap/1177004598. https://projecteuclid.org/euclid.aoap/1177004598


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