Precise continuous time expected deflator for the G2++ model
Abstract
We propose a continuous time algorithm for the estimation of the cash account stochastic discount factor computed by Monte-Carlo simulations of a G2++ model. By taking into account previous results in a discrete time framework, we define a new algorithm that is i) easier to implement without loss of precision and ii) can be used in continuous time models without incurring in possible discretization errors. The simulated stochastic discount factor will be precise in terms of the risk-free measure adopted even when the number of simulated paths is small.
- Published
- 15 September 2021
- Volume
- 2021 (2021)
- License
- CC BY 3.0
Copyright © 2021 Francesco Strati, Luca G. Trussoni. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Cite this article
F. Strati, L. G. Trussoni, Precise continuous time expected deflator for the G2++ model, Math. Finance Lett. 2021 (2021), 3. https://doi.org/10.28919/mfl/5989
BibTeX
@article{Strati2021,
author = {Strati, Francesco and Trussoni, Luca G.},
title = {Precise continuous time expected deflator for the G2++ model},
journal = {Math. Finance Lett.},
volume = {2021},
year = {2021},
pages = {3},
doi = {10.28919/mfl/5989}
}