White's control variate technique (original) (raw)

Quasi Control Variate Method and Applications in Option Pricing

This paper presents a view of variance reduction by a new control variate for pricing arithmetic Asian options .We propose an efficient control variate based on difference between two estimators for the same underlying stochastic sample. We study the effect of different control variables on the arithmetic Asian option price and compare with the new quasi control variate. The numerical experiment shows the advantage of the proposed method.

Option pricing: A simplified approach

Journal of Financial Economics, 1979

This paper presents a simple discrete-time model for valuing options. The fundamental economic principles of option pricing by arbitrage methods are particularly clear in this setting. Its development requires only elementary mathematics, yet it contains as a special limiting case the celebrated Black-Scholes model, which has previously been derived only by much more difficult methods. The basic model readily lends itself to generalization in many ways. Moreover, by its very construction, it gives rise to a simple and efficient numerical procedure for valuing options for which premature exercise may be optimal.