1. What is an Antithetic Variate? Explain the technique and how it reduces the standard error of the estimate?

Q2. What is Control Variate? Explain the technique and how it reduces the standard error of the estimate?

Q4. From the course text entitled “A course in Derivative Securities” and any other resources, explain how “pathwise” estimation of the “Greeks” proceeds?

With reference to model parameters, for a financial value, Greeks are considered as partial derivatives. The permanence of financial quantity can better be measured by using these derivatives. For any modification in parameters, the reaction of said options is determined by using this financial determinant (Greeks). The important terms that are related to the concept of Greeks include following:

·         An agreement to specify the terms of contract b/w the parties, which makes the employees obligated for making payments is basically a derivative. The realization of assets is a key determinant for these derivatives.

·         As far as an option is concerned, it is basically a financial agreement b/w two bodies i.e. the seller and the buyer.

§  The buyer is being provided with a right for buying an asset as per agreed terms and conditions.

§  Whereas, the seller becomes liable for selling the valued asset subject to a specified time limit.

For pathwise estimation of Greeks, the underlying idea is as given below:

For correlation to impact the shape of  multivariate distribution, a supporting theory exists for correlation values. There exists a mean value around which the random parameters cluster.