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Option Pricing and CVA Calculations using the Monte Carlo-Tree (MC-Tree) Method
[article]
2022
The binomial tree method and the Monte Carlo (MC) method are popular methods for solving option pricing problems. However in both methods there is a trade-off between accuracy and speed of computation, both of which are important in applications. We introduce a new method, the MC-Tree method, that combines the MC method with the binomial tree method. It employs a mixing distribution on the tree parameters, which are restricted to give prescribed mean and variance. For the family of mixing
doi:10.48550/arxiv.2202.00785
fatcat:qeyni7tksjar7afb6k3hof36my