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Activity Number:
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651
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Type:
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Contributed
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Date/Time:
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Thursday, August 4, 2016 : 8:30 AM to 10:20 AM
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Sponsor:
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Section on Statistical Computing
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Abstract #320729
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View Presentation
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Title:
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Simulating the Heston Model via the QE Method with a Specified Error Tolerance
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Author(s):
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Xiaoyang Zhao* and Fred Hickernell
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Companies:
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Illinois Institute of Technology and Illinois Institute of Technology
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Keywords:
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Quadratic Exponential scheme ;
Heston model ;
Guaranteed Automatic Integration Library ;
quasi-Monte Carlo ;
user-defined error tolerance
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Abstract:
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The Quadratic Exponential (QE) model is a market standard simulation method for the Heston stochastic volatility model. We implement QE scheme in the Guaranteed Automatic Integration Library (GAIL) -- a suite of algorithms that includes Monte Carlo methods for multidimensional integration and computation of means. GAIL has theoretical guarantees that the user-defined error tolerance will be met. We also apply variance reduction techniques such as importance sampling, control variates, and quasi-Monte Carlo methods to increase accuracy. This talk explains our new algorithm and reports on its performance.
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Authors who are presenting talks have a * after their name.
