Demonstrates efficient pricing of rainbow options using advanced sampling techniques, highlighting their significance.
This paper studies the applications of state-dependent importance sampling in pricing exotic rainbow options. We demonstrate that for many rainbow options, efficient dynamic importance sampling schemes can be constructed from subsolutions to appropriate partial differential equations. We also introduce an alternative large deviations scaling, which leads to universal importance sampling for rainbow options.
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Setayeshgar et al. (2026) studied this question.
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