Efficient Numerical Inversion for Financial Simulations

Derflinger, Gerhard and Hörmann, Wolfgang and Leydold, Josef and Sak, Halis (2009) Efficient Numerical Inversion for Financial Simulations. Research Report Series / Department of Statistics and Mathematics, 87. Department of Statistics and Mathematics, WU Vienna University of Economics and Business, Vienna.


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Generating samples from generalized hyperbolic distributions and non-central chi-square distributions by inversion has become an important task for the simulation of recent models in finance in the framework of (quasi-) Monte Carlo. However, their distribution functions are quite expensive to evaluate and thus numerical methods like root finding algorithms are extremely slow. In this paper we demonstrate how our new method based on Newton interpolation and Gauss-Lobatto quadrature can be utilized for financial applications. Its fast marginal generation times make it competitive, even for situations where the parameters are not always constant.

Item Type: Paper
Additional Information: Paper published in: Pierre L'Ecuyer and Art B. Owen (eds.), Monte Carlo and Quasi-Monte Carlo Methods 2008, Springer-Verlag. The original publication is available at http://www.springerlink.com.
Keywords: random variate generation / numerical inversion / generalized hyperbolic distribution / non-central chi-square distribution / varying parameter / CIR model
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Depositing User: Repository Administrator
Date Deposited: 17 Jun 2009 13:33
Last Modified: 22 Oct 2019 00:41
Related URLs:
URI: https://epub.wu.ac.at/id/eprint/830


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