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Variance Reduction Techniques on Monte Carlo Simulations of path dependent options
There are a lot of discussions and literature about using variance reduction techniques to produce more accurate calculations of option prices, or accurate prices with fewer simulations. They appear to discuss European options. For path dependent options, do you find the same techniques (Sobol sequences, Importance Sampling, etc.) produce more accurate calculations? I would think the techniques would have to be adjusted to produce accurate distributions of the underlying variable at each step in the simulation. Am I wrong?Thanks.
Variance Reduction Techniques on Monte Carlo Simulations of path dependent options
I don't know about the specific methods you mention. But, for barrier options under diffusions, a Brownian bridge is always worth doing.
Variance Reduction Techniques on Monte Carlo Simulations of path dependent options
there's plenty of work on using variance reduction techniques in higher dimensions. See eg Glasserman's book. I also have a fair amount of discussion in "more mathematical finance"
Variance Reduction Techniques on Monte Carlo Simulations of path dependent options
would say the standard 'generic' method is sobol + brownian bridge which also works for path dependent options