Computing functionals of square root and Wishart processes under the benchmark approach via exact simulation

Publisher:
Springer
Publication Type:
Conference Proceeding
Citation:
Monte Carlo and Quasi Monte Carlo Methods 2012, Springer Proceedings in Mathematics and Statistics, 2013, pp. 3 - 22
Issue Date:
2013-01
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The aim of the paper is to show how Wishart processes can be used flexibly in financial modeling. We explain how functionals, resulting from the benchmark approach to finance, can be accurately computed via exact simulation methods. We employ Lie symmetry methods to identify explicit transition densities and explicitly computable functionals. We illustrate the proposed methods via finance problems formulated under the benchmark approach. This approach allows us to exploit conveniently the analytical tractability of the considered diffusion processes.
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