Exact Simulation of the 3/2 Model
Computational Finance
2011-05-19 v2
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.
Cite
@article{arxiv.1105.3297,
title = {Exact Simulation of the 3/2 Model},
author = {Jan Baldeaux},
journal= {arXiv preprint arXiv:1105.3297},
year = {2011}
}
Comments
17 pages