Weak Approximation of Stochastic Differential Equations and Application to Derivative Pricing |
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| Authors: | Syoiti Ninomiya Nicolas Victoir |
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| Affiliation: | 1. Center for Research in Advanced Financial Technology , Tokyo Institute of Technology , 2‐12‐1 Ookayama Meguro‐ku, Tokyo, Japan ninomiya@craft.titech.ac.jp;3. Mathematical Institute , 24‐29 St Giles, Oxford, UK |
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| Abstract: | A new, simple algorithm of order 2 is presented to approximate weakly stochastic differential equations. It is then applied to the problem of pricing Asian options under the Heston stochastic volatility model. 2000 Mathematics Subject Classification, 65C30, 65C05. |
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| Keywords: | Heston model numerical methods for stochastic differential equations mathematical finance quasi‐Monte Carlo method |
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