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Monte Carlo Methods in Financial Engineering
Foundations.- Generating Random Numbers and Random Variables.- Generating Sample Paths.- Variance Reduction Techniques.- Quasi-Monte Carlo Methods.- Discretization Methods.- EstimatingExpand
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Pricing American-style securities using simulation
We develop a simulation algorithm for estimating the prices of American-style securities, i.e. securities with opportunities for early exercice. Our algorithm provides both point estimates and errorExpand
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Estimating security price derivatives using simulation
Simulation has proved to be a valuable tool for estimating security prices for which simple closed form solutions do not exist. In this paper we present two direct methods, a pathwise method and aExpand
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Gradient Estimation Via Perturbation Analysis
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Monte Carlo methods for security pricing
The Monte Carlo approach has proved to be a valuable and flexible computational tool in modern finance. This paper discusses some of the recent applications of the Monte Carlo method to securityExpand
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Importance Sampling for Portfolio Credit Risk
Monte Carlo simulation is widely used to measure the credit risk in portfolios of loans, corporate bonds, and other instruments subject to possible default. The accurate measurement of credit risk isExpand
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A Continuity Correction for Discrete Barrier Options
The payoff of a barrier option depends on whether or not a specified asset price, index, or rate reaches a specified level during the life of the option. Most models for pricing barrier optionsExpand
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Asymptotically Optimal Importance Sampling and Stratification for Pricing Path-Dependent Options
This paper develops a variance reduction technique for Monte Carlo simulations of path-dependent options driven by high-dimensional Gaussian vectors. The method combines " importance sampling" basedExpand
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How Likely Is Contagion in Financial Networks?
Interconnections among financial institutions create potential channels for contagion and amplification of shocks to the financial system. We estimate the extent to which interconnections increaseExpand
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A Sotchastic Mesh Method for Pricing High-Dimensional American Options
High-dimensional pricing problems frequently arise with financial options (examples include basket options, outperformance options, interest-rate and foreign currency options) and real options.Expand
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