The Mathematical Institute, University of Oxford, Eprints Archive

Estimating expected first passage times using multilevel Monte Carlo algorithm

Primozic, Tom (2011) Estimating expected first passage times using multilevel Monte Carlo algorithm. Masters thesis, oxford university.

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Abstract

In this paper we devise a method of numerically estimating the expected first passage times of stochastic processes. We use Monte Carlo path simulations with Milstein discretisation scheme to approximate the solutions of scalar stochastic differential equations. To further reduce the variance of the estimated expected stopping time and improve computational efficiency, we use the multi-level Monte Carlo algorithm, recently developed by Giles (2008a), and other variance-reduction techniques. Our numerical results show significant improvements over conventional Monte Carlo techniques.

Item Type:Thesis (Masters)
Subjects:H - N > Mathematics education
Research Groups:Mathematical and Computational Finance Group
ID Code:1383
Deposited By:Laura Auger
Deposited On:13 Aug 2011 09:55
Last Modified:13 Aug 2011 09:55

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