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Efficient Numerical Inversion for Financial Simulations

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Generating samples from generalized hyperbolic distributions and non-central chi-square distributions by inversion has become an important task for the simulation of recent models in finance in the framework of (quasi-) Monte Carlo. However, their distribution functions are quite expensive to evaluate and thus numerical methods like root finding algorithms are extremely slow. In this paper we demonstrate how our new method based on Newton interpolation and Gauss-Lobatto quadrature can be utilized for financial applications. Its fast marginal generation times make it competitive, even for situations where the parameters are not always constant. (author´s abstract) ; Series: Research Report Series / Department of Statistics and Mathematics

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Gerhard Derflinger, Wolfgang Hörmann, Josef Leydold, Halis Sak

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