Hedge your Monte Carlo

15 March 2001

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Published in: Risk Magazine 14 3, 133-136

While the traditional Black-Scholes approach to option pricing is appealing on grounds of both elegance and tractability, the assumptions underlying it are usually violated in real markets. Here, Marc Potters, Jean-Philippe Bouchaud and Dragan Šestovic´ propose an alternative Monte Carlo-based variance reduction approach to pricing and hedging.

Authors

Marc Potters , Dragan Sestovic , Jean-Philippe Bouchaud