Omar if I knew who is/was Mahler I would have figured out the Mahlerian experience!!.Now, tell me which Mahler are you talking aboutGustav Mahler Kurt Mahler

Gustav Mahler.

Sam,Malliavin calcullus is the formal notation for the calculus of variations of stochastic integrals. If you are not comfortablewith the calculus of variations of conventional integrals, let's just say that for most (in fact all I've seen so far) cases it amountsto exactly the same as what Broadie and Glassermann call the "likelihood ratio" method. I had an article in Paul's magazine'sonly printed version that explained some simple results for the conventional Black-Scholes model. Search the web, there ismore out there. There is also a little more on the likelihood ratio method in my book. As for the hard mathematical formalismthat is actually called Malliavin calculus, I never needed to resort it. There are papers that prove rigorously that among themany corrective factors for the measure (called likelihood ratios by Broadie and Glassermann) that one can choose to obtainthe desired Greeks, the ones that are straightforward to compute (exactly the ones that Broadie and Glassermann wouldgive you, which is what I give in my book) turn out to be optimal in the sense of returning the Greeks with the smallestpossible variance from the simulation. In other words, I don't think Malliavin calculus is useless, but it turns out that thespecial case of Malliavin calculus known as the likelihood ratio method (which is also, in my opinion, fairly easy to comprehend)is the optimal way of computing the Malliavin weights (also known as likelihood ratios).It's not that hard, but it may take more than five minutes to get your head around it.Regards,pj

Audetto,likelihood ratio weights for multiple correlated geometric Brownian motions can be derived butI cannot disclose my own formulae for it for reasons of corporate confidentiality (I have a day job),but you can still derive them yourself.Regards,pj

Hi everybody,for all the people who wants to know malliavin calculus, there is a good working paper here:http://gro.creditlyonnais.fr/content/wp ... in.pdfit's in french, that true, but nicely explicated, whith lots of examples on pricing greeks...and, it's free...best regards

Quoteit's in french, that true, but nicely explicated, whith lots of examples on pricing greeks...and, it's free...I can't read French. Could we ask the author for English version?

Dear All, You can find some comprehensive lecture notes in Josef Teichmann's web page http://www.fam.tuwien.ac.at/~jteichma (as mentioned before in this thread) and also some more advanced stuff in Eric Ben-Hamou's web page http://www.ericbenhamou.fr.stIndeed, Malliavin Calculus is not easy and requires strong knowledge of stochastic and functional analysis, but it is worth the trouble - contrary to what Omar thinks. Banks do tend to use Malliavin Calculus because it allows to compute option price's greeks very fastly and accyrately in a Monte Carlo SimulationBest, Anton

"Banks do tend to use Malliavin Calculus because it allows to compute option price's greeks very fastly and accurately in a Monte Carlo Simulation" I'm happy to be corrected. Are the details in the references that you give? Can you outline to the naive why that's the case?

Malliavin Calculus is not easy and requires strong knowledge of stochastic and functional analysisTextAnton,What level of stochastic analysis are we talking about... Revuz/Yor or do you think an Oksendal level of knowledge would be enough?Thanks,Sam

Dear Omar and Sam,Yes, you can find details in the references I gava, especially in Ben-Hamou's web page.What happens is that you can change between differentiating the payoff (as usually done for the computation of Greeks) to differentiating the density, and that's where Malliavin Calculus comes into play.It allows to do calculus on stochastic processes. Of course, a far more thorough explanation is given in Beh-Hamou's paper: Efficient Computation of Greeks for Discontinuous Payfs byTransformation of the Payoff FunctionI would say that knowledge of analysis at Oksendal level should be sufficient to get started with Malliavin CalculusBest, Anton

... Indeed, that's a fascinating paper. Thanks a lot for this highly interesting link.Best wishesNabla

hi Nabla, this is slightly outside the topic of this thread but since you don't have private-mail ...regarding your personal icon ... what exactly would the value be if we set s=3 ?

Hi reza:... I guess, its value is $\pi^3 \cdot c$, where $c$ is a constant. $\frac{1}{c}$ should be an element of the interval (6, 90)... )Nabla

QuoteOriginally posted by: Vincent<blockquote>Quote<hr>it's in french, that true, but nicely explicated, whith lots of examples on pricing greeks...and, it's free...<hr></blockquote>I can't read French. Could we ask the author for English version?i'm affraid, no...because, they're student from the ensai french statistic school...and it seems to be realised during a training or something else...