Abstract
Closed-form solutions (e.g. Black–Scholes formula) are accurate and fast to calculate.
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- 1.
There exist other schemes, e.g. Milstein scheme which contains a second order term for increasing the accuracy.
- 2.
Quasi-Monte Carlo method uses deterministic but more evenly dispersed sequence of numbers instead of randomly generated numbers. Illustratively, a controlled sequence like {1, 2, 3, 4, 5, 6, 1, 2, 3, 4, 5, 6, …} may converge faster than {1, 6, 2, 4, 3, 6, 3, 5, 1, …} for estimating the expectation of casting a die, which is 3.5.
- 3.
Note that it is not necessary to implement the calculations in matrix form.
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Chan, R.H., Guo, Y.Z., Lee, S.T., Li, X. (2019). Numerical Methods for Option Pricing. In: Financial Mathematics, Derivatives and Structured Products. Springer, Singapore. https://doi.org/10.1007/978-981-13-3696-6_14
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DOI: https://doi.org/10.1007/978-981-13-3696-6_14
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