hard · Quantitative Finance
What is the primary advantage of using a 'control variate' in Monte Carlo simulation for pricing an arithmetic Asian option?
- Using the geometric Asian option's known closed-form price to reduce the estimator's variance.
- Increasing the speed of random number generation.
- Eliminating the need for the Cholesky decomposition.
- Ensuring the simulation converges in O(1/M) instead of O(1/√(M)).
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