Hedged Monte-Carlo: Low variance derivative pricing with objective probabilities

Physica A: Statistical Mechanics and its Applications

Volumn 289, Issue 3-4, 2001, Pages 517-525

  Potters, Marc ^a   Bouchaud, Jean Philippe ^a,b   Sestovic, Dragan ^a  

^a Capital Fund Management   (France)

^b CENTRE D ETUDES DE SACLAY   (France)

Author keywords

[No Author keywords available]

Indexed keywords

MONTE CARLO METHODS; OPTIMIZATION; PROBABILITY; RISK ASSESSMENT;

HEDGED MONTE CARLO METHODS;

INDUSTRIAL ECONOMICS;

EID: 0035863442     PISSN: 03784371     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0378-4371(00)00554-9     Document Type: Article

References (24)

1. F. Black, M. Scholes, J. Political Econ. 81 (1973) 637.
2. J.C. Hull, Futures, Options and Other Derivative Securities, Prentice-Hall, Englewood Cliffs, NJ, 1997.
3. P. Wilmott, J.N. Dewynne, S.D. Howison, Option pricing, Mathematical methods and Computation, Oxford University Press, Oxford, 1993.
4. J. Cox, S. Ross, M. Rubinstein, J. Finance Econom. 7 (1979) 229.
5. M. Harrison, S. Pliska, Stochastic Process. Appl. 11 (1981) 215.
6. M. Baxter, A. Rennie, Financial Calculus, Cambridge University Press, Cambridge, 1997.
7. B. Dupire, in: M. Dempster, S. Pliska (Eds.), Mathematics of Derivative Securities, Cambridge University Press, Cambridge, 1997.
8. F. Longstaff, E. Schwartz, Valuing American options by simulation: a simple least square techniques, UCLA working paper 25-98, June 1999.
9. M. Schweizer, Ann. Probab. 22 (1994) 1536.
10. M. Schäl, Math. Oper. Res. 19 (1994) 121.
11. J.-P. Bouchaud, D. Sornette, J. Phys. I France 4 (1994) 863.
12. J.-P. Bouchaud, M. Potters, Theory of Financial Risks (in French), Aléa-Saclay, Eyrolles, Paris, 1997; idem (in English), Cambridge University Press, Cambridge, 2000.
13. E. Aurell, S. Simdyankin, Int. J. Theor. Appl. Finance 1 (1998) 1.
14. F. Selmi, J.-P. Bouchaud, Hedging large risks reduces transaction costs, e-print cond-mat/0005148, RISK Magazine, submitted for publication.
15. B. Pochart, J.-P. Bouchaud, work in progress.
16. D.M. Guillaume, M.M. Dacorogna, R.D. Davé, U.A. Müller, R.B. Olsen, O.V. Pictet, Finance Stochastics 1 (1997) 95.
17. R. Mantegna, H.E. Stanley, An introduction to Econophysics, Cambridge University Press, Cambridge, 1999.
18. V. Plerou, P. Gopikrishnan, L.A. Amaral, M. Meyer, H.E. Stanley, Phys. Rev. E 60 (1999) 6519.
19. J.-F. Muzy, J. Delour, E. Bacry, Modelling fluctuations of financial time series: From cascade process to stochastic volatility model, e-print cond-mat/0005400.
20. L. Clewlow, A. Caverhill, On the simulation of contingent claims, Journal of Derivatives 2 (1994) 66;
21. RISK Magazine 7 (1994) 63.
22. W.H. Press, B.P. Flannery, S.A. Teukolsky, W.T. Vetterling, Numerical Recipes. The Art of Scientific Computing, Cambridge University Press, Cambridge, 1986.
23. J.-P. Bouchaud, N. Sagna, R. Cont, N. ElKaroui, M. Potters, Appl. Math. Finance 6 (1999) 209.
24. A. Matacz, J.-P. Bouchaud, An empirical investigation of the forward interest rate term structure, e-print cond-mat/9907297, Int. J. Theo. Appl. Finance, vol. 4 (issue no. 3), December 2000.