A martingale control variate method for option pricing with stochastic volatility
Jean-Pierre Fouque, Chuan-Hsiang Han (2007)
ESAIM: Probability and Statistics
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A generic control variate method is proposed to price options under stochastic volatility models by Monte Carlo simulations. This method provides a constructive way to select control variates which are martingales in order to reduce the variance of unbiased option price estimators. We apply a singular and regular perturbation analysis to characterize the variance reduced by martingale control variates. This variance analysis is done in the regime where time scales of associated driving...