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Decisions in Economics and Finance

, Volume 24, Issue 2, pp 153–158 | Cite as

An algorithm for winning coalitions in indirect control of corporations

Notes and comments
  • Nando PratiEmail author
  • Enrico Denti
Article

Abstract.

We describe in this paper a variance reduction method based on control variates. The technique uses the fact that, if all stochastic assets but one are replaced in the payoff function by their mean, the resulting integral can most often be evaluated in closed form. We exploit this idea by applying the univariate payoff as control variate and develop a general Monte Carlo procedure, called Mean Monte Carlo (MMC). The method is then tested on a variety of multifactor options and compared to other Monte Carlo approaches or numerical techniques. The method is of easy and broad applicability and gives good results especially for low to medium dimension and in high volatility environments.

Mathematics Subject Classification (2000): 91A12 
Journal of Economic Literature Classification: C71,D21 

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References

  1. Denti, E., Prati, N. (1996): Finding winning coalitions in indirect weighted majority games.Google Scholar
  2. Working Paper 1-96. Dipartimento di Finanza dell’Impresa e dei Mercati Finanziari, Universit’a di Udine, UdineGoogle Scholar
  3. Denti, E., Prati, N. (1999): Relevance of winning coalitions in indirect control of corporations. Working Paper 1-99. Dipartimento di Finanza dell’Impresa e dei Mercati Finanziari. Universit'a di Udine, UdineGoogle Scholar
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Copyright information

© Springer-Verlag Italia 2001

Authors and Affiliations

  1. 1.Dipartimento Finanza dell’Impresa e dei Mercati Finanziari, University of UdineItaly
  2. 2.DEIS, University of BolognaItaly

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