Suppose that Monte Carlo simulation is being used to evaluate a European call option on a non-dividend-paying
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Suppose that Monte Carlo simulation is being used to evaluate a European call option on a non-dividend-paying stock when the volatility is stochastic. How could the control variate and antithetic variable technique be used to improve numerical efficiency? Explain why it is necessary to calculate six values of the option in each simulation trial when both the control variate and the antithetic variable technique are used.
Monte Carlo simulationMonte Carlo simulation is a technique used to understand the impact of risk and uncertainty in financial, project management, cost, and other forecasting models. A Monte Carlo simulator helps one visualize most or all of the potential outcomes to...
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In this case a simulation requires two sets of samples from standardized normal distributions The fi...View the full answer
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