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http://hdl.handle.net/10419/32189
  
Title:Importance sampling for backward SDEs PDF Logo
Authors:Bendera, Christian
Moseler, Thilo
Issue Date:2008
Series/Report no.:Discussion paper series // Zentrum für Finanzen und Ökonometrie, Universität Konstanz 2008,11
Abstract:In this paper we explain how the importance sampling technique can be generalized from simulating expectations to computing the initial value of backward SDEs with Lipschitz continuous driver. By means of a measure transformation we introduce a variance reduced version of the forward approximation scheme by Bender and Denk [4] for simulating backward SDEs. A fully implementable algorithm using the least-squares Monte Carlo approach is developed and its convergence is proved. The success of the generalized importance sampling is illustrated by numerical examples in the context of Asian option pricing under different interest rates for borrowing and lending.
Subjects:BSDE
Numerics
Monte Carlo simulation
Variance reduction
Document Type:Working Paper
Appears in Collections:CoFE-Diskussionspapiere, Universität Konstanz

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