Variance Reduction Techniques Based on Binary Option Pricing

Abstract

Aiming at the binary option pricing model, control variates and antithetic variates methods are focused on comparing the reasons and influencing factors for the difference of variance reduction effect between them. By adjusting the independent variable of the control variates method and the range of binary options indication function, and by sensitivity analysis of four parameters of the pricing model, the study finds a way to improve the variance reduction ability. Through the detailed mathematical derivation of the antithetic variates method to confirm the law of the 4 parameters in the Black-Scholes model and the binary option price found by the former. And construct more accurate theoretical values to provide better direction for setting options prices in the real world.