Malliavin Monte Carlo Greeks for jump diffusions |
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Authors: | Mark H.A. Davis Martin P. Johansson |
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Affiliation: | 1. Department of Mathematics, Imperial College, London SW7 2AZ, UK;2. Imperial College and Citigroup, Citigroup Centre, 33 Canada Square, 6th Floor, Canary Wharf, London E14 5LB, UK |
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Abstract: | In recent years efficient methods have been developed for calculating derivative price sensitivities using Monte Carlo simulation. Malliavin calculus has been used to transform the simulation problem in the case where the underlying follows a Markov diffusion process. In this work, recent developments in the area of Malliavin calculus for Levy processes are applied and slightly extended. This allows for derivation of similar stochastic weights as in the continuous case for a certain class of jump-diffusion processes. |
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Keywords: | Jump process Lé vy process Monte Carlo estimation Mathematical finance |
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