TY - UNPB
T1 - Multi-Level Monte Carlo Simulations with Importance Sampling
AU - Stilger, Przemyslaw S.
AU - Poon, Ser-Huang
PY - 2013
Y1 - 2013
N2 - We present an application of importance sampling to multi-asset options under the Heston and the Bates models as well as to the Heston-Hull-White and the Heston-Cox-Ingersoll-Ross models. Moreover, we provide an efficient importance sampling scheme in a Multi-Level Monte Carlo simulation. In all cases, we explain how the Greeks can be computed in the different simulation schemes using the Likelihood Ratio Method, and how combining it with importance sampling leads to a significant variance reduction for the Greeks.
AB - We present an application of importance sampling to multi-asset options under the Heston and the Bates models as well as to the Heston-Hull-White and the Heston-Cox-Ingersoll-Ross models. Moreover, we provide an efficient importance sampling scheme in a Multi-Level Monte Carlo simulation. In all cases, we explain how the Greeks can be computed in the different simulation schemes using the Likelihood Ratio Method, and how combining it with importance sampling leads to a significant variance reduction for the Greeks.
KW - Importance sampling, Simulation, Stochastic volatility
M3 - Working paper
BT - Multi-Level Monte Carlo Simulations with Importance Sampling
ER -