EXACT SIMULATION OF THE 3/2 MODEL-Reference-Cited by-同舟云学术

EXACT SIMULATION OF THE 3/2 MODEL

Published:2012-08 Issue:05 Volume:15 Page:1250032
ISSN:0219-0249
Container-title:International Journal of Theoretical and Applied Finance
language:en
Short-container-title:Int. J. Theor. Appl. Finan.

Author:

BALDEAUX JAN¹

Affiliation:

1. Finance Discipline Group, University of Technology Sydney, PO Box 123, Broadway, NSW, 2007, Australia

Abstract

This paper discusses the exact simulation of the stock price process underlying the 3/2 model. Using a result derived by Craddock and Lennox using Lie Symmetry Analysis, we adapt the Broadie-Kaya algorithm for the simulation of affine processes to the 3/2 model. We also discuss variance reduction techniques and find that conditional Monte Carlo techniques combined with quasi-Monte Carlo point sets result in significant variance reductions.

Publisher

World Scientific Pub Co Pte Lt

Subject

General Economics, Econometrics and Finance,Finance

Link

https://www.worldscientific.com/doi/pdf/10.1142/S021902491250032X

Reference28 articles.

1. A Parametric Nonlinear Model of Term Structure Dynamics

2. Retrospective exact simulation of diffusion sample paths with applications

3. A Factorisation of Diffusion Measure and Finite Sample Path Constructions

4. Exact simulation of diffusions

5. Exact Simulation of Stochastic Volatility and Other Affine Jump Diffusion Processes

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