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Fast evaluation of the Asian basket option by singular value decomposition. (English) Zbl 1002.91027

Fang, Kai-Tai (ed.) et al., Monte Carlo and quasi-Monte Carlo methods 2000. Proceedings of a conference, held at Hong Kong Baptist Univ., Hong Kong SAR, China, November 27 - December 1, 2000. Berlin: Springer. 201-214 (2002).
Summary: We investigate the use of singular value decomposition of the noise term in the Asian basket option problem. By performing this decomposition the problem can be formulated as an integral. We find a criterium for deciding the effective dimension of the integrand in the framework of the singular value decomposition. The resulting integration problem is calculated by a suited quasi Monte Carlo method. The simulation results show that the proposed criterium works well, and that the computing time can be reduced significantly compared to the full problem.
For the entire collection see [Zbl 0980.00040].

MSC:

91B28 Finance etc. (MSC2000)
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