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Economia Aplicada

Print version ISSN 1413-8050On-line version ISSN 1980-5330

Abstract

SILVA, Marcos Eugênio da  and  BARBE, Thierry. Quasi-Monte Carlo in finance: extending for problems of high effective dimension. Econ. Apl. [online]. 2005, vol.9, n.4, pp.577-594. ISSN 1980-5330.  https://doi.org/10.1590/S1413-80502005000400004.

In this paper we show that it is possible to extend the use of quasi-Monte Carlo for applications of high effective dimension. This is achieved through a combination of a careful construction of the Sobol sequence and an appropriately chosen decomposition of a covariance matrix. The effectiveness of this procedure is demonstrated as we price average options with nominal dimensions ranging up to 550 (effective dimension around 300). We believe the method we present is easy to implement and should be of great interest to practitioners.

Keywords : quasi-Monte Carlo; low-discrepancy; Sobol; effective dimension; deterministic sequences.

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