<i>t</i>-Copula generation for control variates


HÖRMANN W., Sak H.

MATHEMATICS AND COMPUTERS IN SIMULATION, cilt.81, sa.4, ss.782-790, 2010 (SCI-Expanded) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 81 Sayı: 4
  • Basım Tarihi: 2010
  • Doi Numarası: 10.1016/j.matcom.2010.07.005
  • Dergi Adı: MATHEMATICS AND COMPUTERS IN SIMULATION
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Sayfa Sayıları: ss.782-790
  • İstanbul Kültür Üniversitesi Adresli: Hayır

Özet

The standard method for generating multi-t vectors is simple and convenient but it has the disadvantage that the generated multi-normal and multi-t vectors are not similar. For t-copula models this destroys much of the variance reduction when using the result of the multi-normal model as external control variate. Therefore we develop a new generation method for multi-t vectors. It is based on the polar method and numerical inversion, and generates multi-normal and multi-t vectors that are very similar. Numerical experiments with simple functions of the weighted sum of t-copula vectors and with pricing European basket options with a t-copula model confirm that the obtained variance reduction factors of the new method are high; 2-100 times higher than when using the standard generation method. (C) 2010 IMACS. Published by Elsevier B.V. All rights reserved.