Abstract
We investigate the use of singular value decomposition of the noise term in the Asian basket option problem. By performing this decomposition the problem can be formulated as an integral. We find a critérium for deciding the effective dimension of the integrand in the framework of the singular value decomposition. The resulting integration problem is calculated by a suited quasi Monte Carlo method. The simulation results show that the proposed critérium works well, and that the computing time can be reduced significantly compared to the full problem.
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© 2002 Springer-Verlag Berlin Heidelberg
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Dahl, L.O., Benth, F.E. (2002). Fast Evaluation of the Asian Basket Option by Singular Value Decomposition. In: Fang, KT., Niederreiter, H., Hickernell, F.J. (eds) Monte Carlo and Quasi-Monte Carlo Methods 2000. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-56046-0_13
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DOI: https://doi.org/10.1007/978-3-642-56046-0_13
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-42718-6
Online ISBN: 978-3-642-56046-0
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