Reducing Monte Carlo Standard Error using Antithetic Variates
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1. Context
In this video from FRM Part 1 curriculum, we take a look a the antithetic variates technique to reduce the standard error of our Monte Carlo based estimator. This technique simulates the chosen variable as a pair of values – with the members of the pair having a negative dependence amongst themselves. This negative dependence reduces the variance of the estimator and hence, the standard error. For more information about the FRM Part 1 preparation course, please visit the course page.
| Area | Quantitative Analysis |
| Reading | Simulation and Bootstrapping |
| Reference | Chapter 13, Simulation and Bootstrapping, GARP Official Books (Book 2, Quantitative Analysis). |