Calculation aspects of the European rebalanced basket option using Monte Carlo methods : valuation

Van der Merwe, C. J. ; Conradie, W. J. (2012)

CITATION: Van der Merwe, C. J. & Conradie, W. J. 2012. Calculation aspects of the European rebalanced basket option using Monte Carlo methods : valuation. Orion, 28(1):1-18, doi:10.5784/28-1-104.

The original publication is available at http://orion.journals.ac.za

Article

Extra premiums can be charged to a client to guarantee a minimum payout of a contract on a portfolio that gets rebalanced on a regular basis back to fixed proportions. The valuation of this premium can be changed to that of the pricing of a European put option with underlying rebalanced portfolio. This article finds the most efficient estimators for the value of this path-dependant multi-asset put option using different Monte Carlo methods. With the help of a refined method, computing time of the value decreased significantly. Furthermore, Variance Reduction Techniques and Quasi-Monte Carlo methods delivered more accurate and faster converging estimates as well.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/82564
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