The Method of Common Random Numbers: An Example

Variance reduction is of great interest to the creators of Monte Carlo experiments. For example, investment banks use very complicated Monte Carlo simulations to price esoteric mortgage-backed securities. These simulations often run overnight because many Monte Carlo trials are necessary to obtain (by the central limit theorem) a point estimate of some true population parameter, bounded by a relatively small confidence interval. One way to reduce the number of required Monte Carlo trials is to use a variance reduction techniqueComponente Curricular::Educação Superior::Ciências Exatas e da Terra::Probabilidade e Estatístic