Monte Carlo simulation

Being particular about calibration

Following previous work on the calibration of multi-factor local stochastic volatility models to market smiles, Julien Guyon and Pierre Henry-Labordère show how to calibrate exactly any such model. Their approach, based on McKean’s particle method,…

Confidence in controlling risk measures

Insurers increasingly use stochastic simulation approaches for estimating risk capital, but numerical errors are rarely measured. A control variate method can improve the accuracy dramatically without increasing the number of simulations.

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