Efficient basket Monte Carlo option pricing via a simple analytical approximation

• Autores: Ralf Korn, Serkan Zeytun
• Localización: Journal of computational and applied mathematics, ISSN 0377-0427, Vol. 243, Nº 1, 2013, págs. 48-59
• Idioma: inglés
• DOI: 10.1016/j.cam.2012.10.035
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• Resumen

  • We present a new valuation method for basket options that is based on a limiting approximation of the arithmetic mean by the geometric mean. Using this approximation combined with a new analytical pricing formula for an approximating geometric meanbased option as a control variate, excellent performance for Monte Carlo pricing in a control variate setting is obtained.