Multilevel Monte Carlo (MLMC) Methods
Multilevel Monte Carlo (MLMC) is a variance reduction strategy designed to estimate the expected value of a random variable P when the exact simulation is computationally expensive. Instead of sampling only from a high-fidelity model, MLMC uses a hierarchy of models with increasing accuracy and cost.
A step-by-step algorithm and an illustrative example are included in Optimal Variance Reduction via Multilevel Monte Carlo (MLMC) Methods
Methods
Derivatives Markets
- Stock Options
Including Exotic Options - Interest Rate Derivatives
Short Rate Model - Credit Derivatives
structural Models and Reduced Models