Option Pricing under the Normal Inverse Gaussian Distributions

Y. Lai (Canada)


Normal Inverse Distributions, Option pricing; Monte Carlo and Quasi-Monte Carlo simulation methods.


This paper discusses European style option pricing for both path dependent and nonpath dependent cases where the log returns of the underlying asset follow the normal in verse Gaussian (NIG) distributions. The moment match ing method is used in estimating model parameters. The Monte Carlo method and the Sobol’ sequence based quasi Monte Carlo method combined with some variance reduc tion methods are used in simulating option prices. Our test results show that the (randomized) quasi-Monte Carlo method is more efficient than the Monte Carlo method if both with the same variance reduction method.

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