Path Integrals and Smart Monte Carlo - I
16 Pages Posted: 13 Jul 2016 Last revised: 22 Jul 2016
Date Written: July 11, 2016
We present “Smart Monte Carlo” or SMC, improving the efficiency of Monte Carlo (MC) simulations. SMC has two “stages”. The first stage, run adaptively for each deal, produces equivalent results to standard MC simulation using fewer calls to the time-consuming pricing functions. The second SMC stage is standard MC simulation for a portfolio, using price look-ups from the first SMC stage. The result has improved accuracy and speed. Examples are given.
Keywords: Smart Monte Carlo, SMC, efficiency, Monte Carlo, fewer calls, price look-ups
JEL Classification: C14, C63, C65, G1
Suggested Citation: Suggested Citation