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Asymptotic Normality for EMS Option Price Estimator with Continuous or Discontinuous Payoff Functions
- Source :
- Management Science. 55(8):1438-1450
- Publication Year :
- 2009
-
Abstract
- Empirical martingale simulation (EMS) was proposed by Duan and Simonato (Duan, J.-C., J.-G. Simonato. 1998. Empirical martingale simulation for asset prices. Management Sci. 44(9) 1218–1233) as an adjustment to the standard Monte Carlo simulation to reduce simulation errors. The EMS price estimator of derivative contracts was shown to be asymptotically normally distributed in Duan et al. (Duan, J.-C., G. Gauthier, J.-G. Simonato. 2001. Asymptotic distribution of the EMS option price estimator. Management Sci. 47(8) 1122–1132) when the payoffs are piecewise linear and continuous. In this paper, we extend the asymptotic normality result to more general continuous payoffs, and for discontinuous payoffs we make a conjecture.
- Subjects :
- Computer Science::Computer Science and Game Theory
empirical martingale simulation, Monte Carlo, Black-Scholes, GARCH, options, regression analysis, asymptotic normality, coverage rate
Strategy and Management
Autoregressive conditional heteroskedasticity
Stochastic game
Monte Carlo method
Asymptotic distribution
Estimator
Black–Scholes model
Management Science and Operations Research
Piecewise linear function
Martingale (probability theory)
Mathematical economics
Mathematics
Subjects
Details
- Volume :
- 55
- Issue :
- 8
- Database :
- OpenAIRE
- Journal :
- Management Science
- Accession number :
- edsair.doi.dedup.....5e9ad81fb7044220df7ccba314e29377
- Full Text :
- https://doi.org/10.1287/mnsc.1090.1036