Type of Document	Dissertation
Author	Salta, Emmanuel
Author's Email Address	esalta@math.fsu.edu
URN	etd-10162008-092503
Title	Variance Reduction Techniques in Pricing Financial Derivatives
Degree	Doctor of Philosophy
Department	Mathematics, Department of
Advisory Committee	Advisor Name Title Giray Okten Committee Chair Bettye Anne Case Committee Member Brian Ewald Committee Member Craig Nolder Committee Member John R. Quine Committee Member Ashok Srinivasan Outside Committee Member
Keywords	Truncated Distribution Tilted Density Black-Scholes-Merton Glasserman and Staum Estimators Option Price Estimation Asian Options Markov Chain Stochastic Optimization Heuristics Likelihood Ratio
Date of Defense	2008-09-25
Availability	unrestricted
Abstract In this dissertation, we evaluate existing Monte Carlo estimators and develop new Monte Carlo estimators for pricing financial options with the goal of improving precision. In Chapter 2, we discuss the conditional expectation Monte Carlo estimator for pricing barrier options, and show that the formulas for this estimator that are used in the literature are incorrect. We provide a correct version of the formula. In Chapter 3, we focus on importance sampling methods in estimating the price of barrier options. We show how a simulated annealing procedure can be used to estimate the parameters required in the importance sampling method. We end this chapter by evaluating the performance of the combined importance sampling and conditional expectation method. In Chapter 4, we analyze the estimators introduced by Ross and Shanthikumar in pricing barrier options and present a numerical example to test their performance.
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