Nonparametric Malliavin-Monte Carlo computation of hedging Greeks

Artikel

We propose a way to compute the hedging Delta using the Malliavin weight method. Our approach, which we name the l-method, generally outperforms the standard Monte Carlo finite difference method, especially for discontinuous payoffs. Furthermore, our approach is nonparametric, as we only assume a general local volatility model and we substitute the volatility and the other processes involved in the Greek formula with quantities that can be nonparametrically estimated from a given time series of observed prices.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Risks ; ISSN: 2227-9091 ; Volume: 8 ; Year: 2020 ; Issue: 4 ; Pages: 1-17 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: Delta hedging ; risk management ; Monte Carlo simulation ; Malliavin calculus ; price-volatility feedback rate ; nonparametric estimation ; fourier analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mancino, Maria Elvira ; Sanfelici, Simona
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2020

Further information

• DOI: doi:10.3390/risks8040120
• Handle: http://hdl.handle.net/10419/258073
• Last update: 10.03.2025, 11:41 AM CET