How much a control variate helps
You price a derivative by Monte Carlo (payoff ) and use a control variate with a known mean - you subtract off using the optimal coefficient . You measure , , and . After applying the optimal control variate, what fraction of the original variance still remains? Give it to four decimals.
Show hints (2)+
- The optimal control variate leaves the regression residual: a fraction of the original variance.
- ; the question asks the fraction remaining, not the cut.
Answer
Reveal answer →Final answer
0.64 (± 0.001)
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