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Computing Functionals of Square Root and Wishart Processes Under the Benchmark Approach via Exact Simulation

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Monte Carlo and Quasi-Monte Carlo Methods 2012

Part of the book series: Springer Proceedings in Mathematics & Statistics ((PROMS,volume 65))

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Abstract

The aim of the paper is to show how Wishart processes can be used flexibly in financial modeling. We explain how functionals, resulting from the benchmark approach to finance, can be accurately computed via exact simulation methods. We employ Lie symmetry methods to identify explicit transition densities and explicitly computable functionals. We illustrate the proposed methods via finance problems formulated under the benchmark approach. This approach allows us to exploit conveniently the analytical tractability of the considered diffusion processes.

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Author information

Author notes

  1. Jan Baldeaux

    Present address: Quant Models & Development, Danske Bank, Denmark

Authors and Affiliations

  1. Finance Discipline Group, University of Technology, 123, Broadway, Sydney, NSW, 2007, Australia

    Jan Baldeaux

  2. Finance Discipline Group and School of Mathematical Sciences, University of Technology, 123, Broadway, Sydney, NSW, 2007, Australia

    Eckhard Platen

Authors
  1. Jan Baldeaux
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  2. Eckhard Platen
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Corresponding author

Correspondence to Jan Baldeaux .

Editor information

Editors and Affiliations

  1. The University of New South Wales School of Mathematics and Statistics, Sydney, New South Wales, Australia

    Josef Dick

  2. The University of New South Wales School of Mathematics and Statistics, Sydney, New South Wales, Australia

    Frances Y. Kuo

  3. The University of New South Wales School of Mathematics and Statistics, Sydney, New South Wales, Australia

    Gareth W. Peters

  4. The University of New South Wales School of Mathematics and Statistics, Sydney, New South Wales, Australia

    Ian H. Sloan

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Baldeaux, J., Platen, E. (2013). Computing Functionals of Square Root and Wishart Processes Under the Benchmark Approach via Exact Simulation. In: Dick, J., Kuo, F., Peters, G., Sloan, I. (eds) Monte Carlo and Quasi-Monte Carlo Methods 2012. Springer Proceedings in Mathematics & Statistics, vol 65. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-41095-6_1

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