Large and moderate deviations for importance sampling in the Heston model-Reference-Cited by-同舟云学术

Large and moderate deviations for importance sampling in the Heston model

Published:2023-06-22 Issue: Volume: Page:
ISSN:0254-5330
Container-title:Annals of Operations Research
language:en
Short-container-title:Ann Oper Res

Author:

Geha Marc,Jacquier Antoine^ORCID,Žurič Žan

Abstract

AbstractWe provide a detailed importance sampling analysis for variance reduction in stochastic volatility models. The optimal change of measure is obtained using a variety of results from large and moderate deviations: small-time, large-time, small-noise. Specialising the results to the Heston model, we derive many closed-form solutions, making the whole approach easy to implement. We support our theoretical results with a detailed numerical analysis of the variance reduction gains.

Funder

Engineering and Physical Sciences Research Council

Publisher

Springer Science and Business Media LLC

Subject

Management Science and Operations Research,General Decision Sciences

Link

https://link.springer.com/content/pdf/10.1007/s10479-023-05424-0.pdf

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