Weighted Monte-Carlo Methods for Multi-Asset Equity Derivatives: Theory and Practice

Topics:
Investment and Capital Markets
Tags:
Correlation,
Financial Services,
New York University,
Theory
Source:
New York University

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Overview: This document presents a statement of the calibration problem for multi-asset equity derivatives. It then illustrates a weighted Monte Carlo simulation (max-entropy and applies it to Arbitrage Pricing of Basket Options. The presentation then draws a comparison between WMC and Steepest Descent Method. Finally, it provides comments on correlation skew and the statistics of implied and historical correlations.

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Format: PDF | Size: 127KB | Date: Nov 2002 | Pages: 24

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