Efficient Numerical Inversion for Financial Simulations

Gerhard Derflinger, Wolfgang Hörmann, Josef Leydold, Halis Sak

Publication: Chapter in book/Conference proceedingContribution to conference proceedings


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 inter-polation 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
Title of host publicationMonte Carlo and Quasi-Monte Carlo Methods 2008
Editors Pierre L'Ecuyer and Art B. Owen
Place of PublicationBerlin
Pages297 - 304
Publication statusPublished - 1 Dec 2009

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