Journal of Computational Finance

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Using Monte Carlo simulation and importance sampling to rapidly obtain jump-diffusion prices of continuous barrier options

Mark S. Joshi, Terence S. Leung

ABSTRACT

The problem of pricing a continuous barrier option in a jump-diffusion model is studied. It is shown via an effective combination of importance sampling and analytic formulas that substantial speed ups can be achieved. These techniques are shown to be particularly effective for computing deltas.

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