Trapped by the Tails of the Bivariate Normal Distribution

8 Pages Posted: 4 Dec 2013

See all articles by Fabien Le Floc'h

Fabien Le Floc'h

Calypso Technology; Independent

Hector Ciruelos

Calypso Technology

Alexander Prüll

Erste Group Bank AG

Date Written: March 1, 2013

Abstract

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

Suggested Citation

Le Floc'h, Fabien and Ciruelos, Hector and Prüll, Alexander, Trapped by the Tails of the Bivariate Normal Distribution (March 1, 2013). Available at SSRN: https://ssrn.com/abstract=2317798 or http://dx.doi.org/10.2139/ssrn.2317798

Fabien Le Floc'h (Contact Author)

Calypso Technology ( email )

106 rue de la Boetie
Paris, 75008
France

Independent ( email )

France

Hector Ciruelos

Calypso Technology ( email )

17 Dominion Street
London, EC2M 2EF
United Kingdom

Alexander Prüll

Erste Group Bank AG ( email )

Am Belvedere 1
Vienna, 1100
Austria

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