Work reduction in financial simulations

Jeremy Staum*, Samuel Ehrlichman, Vadim Lesnevski

*Corresponding author for this work

Research output: Contribution to journalConference article

2 Scopus citations

Abstract

We investigate the possibility of efficiency gains from schemes that reduce the expected cost of a simulated path, which allows more paths given a fixed computational budget. Many such schemes impart bias, so we look at the bias-variance tradeoff in terms of mean squared error. The work reduction schemes we consider are fast numerical evaluation of functions, such as the exponential, as well as changes to simulation structure and sampling schemes. The latter include descriptive sampling, reducing the number of time steps, and dispensing with some factors in a multi-factor simulation. In simulations where computational budgets are tightly constrained, such as risk management and calibration of financial models, using cheaper, less accurate algorithms can reduce mean squared error.

Original languageEnglish (US)
Pages (from-to)310-318
Number of pages9
JournalWinter Simulation Conference Proceedings
Volume1
StatePublished - Dec 1 2003
EventProceedings of the 2003 Winter Simulation Conference: Driving Innovation - New Orleans, LA, United States
Duration: Dec 7 2003Dec 10 2003

ASJC Scopus subject areas

  • Software
  • Modeling and Simulation
  • Safety, Risk, Reliability and Quality
  • Chemical Health and Safety
  • Applied Mathematics

Fingerprint Dive into the research topics of 'Work reduction in financial simulations'. Together they form a unique fingerprint.

  • Cite this

    Staum, J., Ehrlichman, S., & Lesnevski, V. (2003). Work reduction in financial simulations. Winter Simulation Conference Proceedings, 1, 310-318.