Simulating Lévy Processes from Their Characteristic Functions and Financial Applications

The simulation of a discrete sample path of a Lévy process reduces to simulating from the distribution of a Lévy increment. For a general Lévy process with exponential moments, the inverse transform method proposed in Glasserman and Liu [2010] is reliable and efficient. The values of the cumulative distribution function (cdf) are computed by inverting the… CONTINUE READING