Path Integrals and Smart Monte Carlo - I

16 Pages Posted: 13 Jul 2016 Last revised: 22 Jul 2016

See all articles by Jan Dash

Jan Dash

Fordham University; Bloomberg LP

Xipei Yang

Bloomberg L.P.

Date Written: July 11, 2016

Abstract

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

Dash, Jan and Yang, Xipei, Path Integrals and Smart Monte Carlo - I (July 11, 2016). Available at SSRN: https://ssrn.com/abstract=2808177 or http://dx.doi.org/10.2139/ssrn.2808177

Jan Dash (Contact Author)

Fordham University ( email )

113 W. 60th St
New York, NY 10023
United States

Bloomberg LP ( email )

731 Lexington Ave
New York, NY 10022
United States

Xipei Yang

Bloomberg L.P. ( email )

731 Lexington Avenue
New York, NY 10022
United States

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