This paper proposes a hybrid Monte Carlo simulation method for pricing European options under the stochastic volatility model and three-factor model.First,the European options are expressed as a conditional expectatio...This paper proposes a hybrid Monte Carlo simulation method for pricing European options under the stochastic volatility model and three-factor model.First,the European options are expressed as a conditional expectation formula,which can be used not only for reducing variance of simulations,but also for calculating the value of Greeks easily,due to the elimination of the weak singularity for the payoff of the option.Then,in order to reduce variance further,the authors also construct a new explicit regression based control variate under Heston model and three-factor model respectively.Numerical results of experiments show that the proposed method can greatly reduce the variance of simulation for pricing European option,and is easy to complement for the calculation of Greeks.展开更多
文摘This paper proposes a hybrid Monte Carlo simulation method for pricing European options under the stochastic volatility model and three-factor model.First,the European options are expressed as a conditional expectation formula,which can be used not only for reducing variance of simulations,but also for calculating the value of Greeks easily,due to the elimination of the weak singularity for the payoff of the option.Then,in order to reduce variance further,the authors also construct a new explicit regression based control variate under Heston model and three-factor model respectively.Numerical results of experiments show that the proposed method can greatly reduce the variance of simulation for pricing European option,and is easy to complement for the calculation of Greeks.
