Review of Finance Vol. 19 No. 2 2015
Variance Reduction for Asian Options under a General Model Framework
Abstract
We present a new variance reduction method for Asian options under a general model framework. The three special cases we consider are Lévy processes, Heston stochastic volatility, and regime switching models. The proposed method combines a very effective control variate with conditional Monte Carlo. While the control variate can be used for any model allowing the numerical computation of the multivariate characteristic function of the log-return vector, conditional Monte Carlo is based on the unified representation of the three models. Computational results confirm that the new method performs better than available control variate methods.
- DOI
- 10.1093/rof/rfu005
- Volume
- 19
- Issue
- 2
- Pages
- 907-949
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref