2009•Unpublished venueRequires access

Monte Carlo Variance Reduction. Importance Sampling Techniques

Olariu Emanuel Florentin

Abstract

In this paper we investigate some Importance Sampling strategies and we apply them for the first time to the pricing of the spread options. We compare the Least Squares method to the f-divergence method in order to choose the importance sampling functions. Our numerical results reveals that the use of the divergences is frequently less computationally and time costly.

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Available abstract

Key concepts: Variance reduction, Importance sampling, Monte Carlo method, Sampling (signal processing), Divergence (linguistics), Computer science, Variance (accounting), Reduction (mathematics)