Efficient Numerical Inversion for Financial Simulations

Gerhard Derflinger, Wolfgang Hörmann, Josef Leydold, Halis Sak

Publication: Working/Discussion PaperWU Working Paper

Abstract

Generating samples from generalized hyperbolic distributions and non-central chi-square distributions by inversion has become an important task for the simulation of recent models in finance in the framework of (quasi-) Monte Carlo. However, their distribution functions are quite expensive to evaluate and thus numerical methods like root finding algorithms are extremely slow. In this paper we demonstrate how our new method based on Newton interpolation and Gauss-Lobatto quadrature can be utilized for financial applications. Its fast marginal generation times make it competitive, even for situations where the parameters are not always constant.
Original languageEnglish
Publication statusPublished - 1 Jun 2009

Publication series

NameResearch Report Series / Department of Statistics and Mathematics
No.87

WU Working Paper Series

  • Research Report Series / Department of Statistics and Mathematics

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