Trapped by the Tails of the Bivariate Normal Distribution
8 Pages Posted: 4 Dec 2013
Date Written: March 1, 2013
Through the example of partial barrier options, we show that accuracy in the tail of the bivariate normal distribution is critical. We then propose a small change to a popular algorithm for the bivariate normal distribution in order to increase its accuracy.
Keywords: bivariate normal distribution, normal distribution, partial barrier option, finance
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