Print Email Facebook Twitter On an efficient multiple time step Monte Carlo simulation of the SABR model Title On an efficient multiple time step Monte Carlo simulation of the SABR model Author Leitao Rodriguez, A. (TU Delft Numerical Analysis; Centrum Wiskunde & Informatica (CWI)) Grzelak, L.A. (TU Delft Numerical Analysis; ING) Oosterlee, C.W. (TU Delft Numerical Analysis; Centrum Wiskunde & Informatica (CWI)) Date 2017 Abstract In this paper, we will present a multiple time step Monte Carlo simulation technique for pricing options under the Stochastic Alpha Beta Rho model. The proposed method is an extension of the one time step Monte Carlo method that we proposed in an accompanying paper Leitao et al. [Appl. Math. Comput. 2017, 293, 461–479], for pricing European options in the context of the model calibration. A highly efficient method results, with many very interesting and nontrivial components, like Fourier inversion for the sum of log-normals, stochastic collocation, Gumbel copula, correlation approximation, that are not yet seen in combination within a Monte Carlo simulation. The present multiple time step Monte Carlo method is especially useful for long-term options and for exotic options. Subject CopulasExact simulationExotic optionsFourier techniquesMonte Carlo methodsSABR modelStochastic collocation To reference this document use: http://resolver.tudelft.nl/uuid:d2555175-98ac-46fc-acdb-7549cd3a2851 DOI https://doi.org/10.1080/14697688.2017.1301676 ISSN 1469-7688 Source Quantitative Finance, 17 (10), 1549-1565 Part of collection Institutional Repository Document type journal article Rights © 2017 A. Leitao Rodriguez, L.A. Grzelak, C.W. Oosterlee Files PDF _12_10_2017_On_an_effi.pdf 986.32 KB Close viewer /islandora/object/uuid:d2555175-98ac-46fc-acdb-7549cd3a2851/datastream/OBJ/view