Hi everybody,
in Daniel's book it is announced that there are some pdf files for additional information. One of them comes here. It is on Theory of Monte Carlo methods. For much more details and code of course see the forthcoming book on Monte Carlo methods!
Cheers. Joerg
Monte Carlo Theory
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Monte Carlo Theory
by Lapsilago » Sun Jul 15, 2007 9:21 pm
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MC_Chapter_Theory.pdf- pdf on Monte Carlo Theroy
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- Lapsilago
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by Cuchulainn » Sat Aug 23, 2008 12:43 pm
dS = rSdt + vol*S^b*dW == rSdt + (vol*S^b-1)SdW
r = 0.05
b = -3 (!) elasticity
vol = 0.20 * S^(1-b)
T = 0.5
K = 110
S = 100
Exact put == 9.3486
Now, using Euler with a constant mesh size for this case gives awful result, nowhere near the exact value. I have an adaptive mesh Euler method that does give good results but I need to tune the algorithm.
BTW Euler is OK up about b = -1.5.
Has anyone else experiened this behaviour?
r = 0.05
b = -3 (!) elasticity
vol = 0.20 * S^(1-b)
T = 0.5
K = 110
S = 100
Exact put == 9.3486
Now, using Euler with a constant mesh size for this case gives awful result, nowhere near the exact value. I have an adaptive mesh Euler method that does give good results but I need to tune the algorithm.
BTW Euler is OK up about b = -1.5.
Has anyone else experiened this behaviour?
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Cuchulainn - Posts: 677
- Joined: Mon Dec 18, 2006 2:48 pm
- Location: Amsterdam, the Netherlands
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