Journal of Computational Finance

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A variance reduction technique using a quantized Brownian motion as a control variate

Antoine Lejay and Victor Reutenauer

ABSTRACT

This paper introduces a new variance reduction technique for diffusion processes where a control variate is constructed using a quantization of the coefficients of the Karhunen-Loève decomposition of the underlying Brownian motion. This method can also be used for other Gaussian processes.

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