Smoothing discontinuities in option Greeks estimation: A sigmoid-family infinitesimal perturbation analysis approach.
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| Title: | Smoothing discontinuities in option Greeks estimation: A sigmoid-family infinitesimal perturbation analysis approach. |
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| Authors: | Yang, Senyun1 (AUTHOR), Zhang, Zhimin1,2 (AUTHOR) zmzhang@cqu.edu.cn |
| Source: | Mathematics & Computers in Simulation. Oct2026, Vol. 248, p668-685. 18p. |
| Subjects: | Options (Finance), Logistic functions (Mathematics), Financial risk management, Perturbation theory, Sensitivity analysis, Risk managers, Derivative securities |
| Abstract: | This paper addresses the estimation of option Greeks in the context of financial derivatives pricing and risk management. Although the classical infinitesimal perturbation analysis (IPA) method is favored for its ease of implementation and low variance, its application is severely limited by discontinuities in the payoff functions, such as those encountered in digital and barrier options. To address this challenge, we propose a sigmoid-family IPA (SF-IPA) method that uses a parameterized sigmoid function to smooth out discontinuities in the indicator function. This transformation yields an asymptotically unbiased derivative estimator with controllable bias. Theoretical analysis provides explicit non-asymptotic error bounds. Numerical experiments across various models demonstrate that the SF-IPA method achieves competitive performance in terms of both accuracy and efficiency. [ABSTRACT FROM AUTHOR] |
| Copyright of Mathematics & Computers in Simulation is the property of Elsevier B.V. and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.) | |
| Database: | Engineering Source |
| FullText | Text: Availability: 0 |
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| Header | DbId: egs DbLabel: Engineering Source An: 194124876 AccessLevel: 6 PubType: Periodical PubTypeId: serialPeriodical PreciseRelevancyScore: 0 |
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| Items | – Name: Title Label: Title Group: Ti Data: Smoothing discontinuities in option Greeks estimation: A sigmoid-family infinitesimal perturbation analysis approach. – Name: Author Label: Authors Group: Au Data: <searchLink fieldCode="AR" term="%22Yang%2C+Senyun%22">Yang, Senyun</searchLink><relatesTo>1</relatesTo> (AUTHOR)<br /><searchLink fieldCode="AR" term="%22Zhang%2C+Zhimin%22">Zhang, Zhimin</searchLink><relatesTo>1,2</relatesTo> (AUTHOR)<i> zmzhang@cqu.edu.cn</i> – Name: TitleSource Label: Source Group: Src Data: <searchLink fieldCode="JN" term="%22Mathematics+%26+Computers+in+Simulation%22">Mathematics & Computers in Simulation</searchLink>. Oct2026, Vol. 248, p668-685. 18p. – Name: Subject Label: Subjects Group: Su Data: <searchLink fieldCode="DE" term="%22Options+%28Finance%29%22">Options (Finance)</searchLink><br /><searchLink fieldCode="DE" term="%22Logistic+functions+%28Mathematics%29%22">Logistic functions (Mathematics)</searchLink><br /><searchLink fieldCode="DE" term="%22Financial+risk+management%22">Financial risk management</searchLink><br /><searchLink fieldCode="DE" term="%22Perturbation+theory%22">Perturbation theory</searchLink><br /><searchLink fieldCode="DE" term="%22Sensitivity+analysis%22">Sensitivity analysis</searchLink><br /><searchLink fieldCode="DE" term="%22Risk+managers%22">Risk managers</searchLink><br /><searchLink fieldCode="DE" term="%22Derivative+securities%22">Derivative securities</searchLink> – Name: Abstract Label: Abstract Group: Ab Data: This paper addresses the estimation of option Greeks in the context of financial derivatives pricing and risk management. Although the classical infinitesimal perturbation analysis (IPA) method is favored for its ease of implementation and low variance, its application is severely limited by discontinuities in the payoff functions, such as those encountered in digital and barrier options. To address this challenge, we propose a sigmoid-family IPA (SF-IPA) method that uses a parameterized sigmoid function to smooth out discontinuities in the indicator function. This transformation yields an asymptotically unbiased derivative estimator with controllable bias. Theoretical analysis provides explicit non-asymptotic error bounds. Numerical experiments across various models demonstrate that the SF-IPA method achieves competitive performance in terms of both accuracy and efficiency. [ABSTRACT FROM AUTHOR] – Name: AbstractSuppliedCopyright Label: Group: Ab Data: <i>Copyright of Mathematics & Computers in Simulation is the property of Elsevier B.V. and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract.</i> (Copyright applies to all Abstracts.) |
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| RecordInfo | BibRecord: BibEntity: Identifiers: – Type: doi Value: 10.1016/j.matcom.2026.04.020 Languages: – Code: eng Text: English PhysicalDescription: Pagination: PageCount: 18 StartPage: 668 Subjects: – SubjectFull: Options (Finance) Type: general – SubjectFull: Logistic functions (Mathematics) Type: general – SubjectFull: Financial risk management Type: general – SubjectFull: Perturbation theory Type: general – SubjectFull: Sensitivity analysis Type: general – SubjectFull: Risk managers Type: general – SubjectFull: Derivative securities Type: general Titles: – TitleFull: Smoothing discontinuities in option Greeks estimation: A sigmoid-family infinitesimal perturbation analysis approach. Type: main BibRelationships: HasContributorRelationships: – PersonEntity: Name: NameFull: Yang, Senyun – PersonEntity: Name: NameFull: Zhang, Zhimin IsPartOfRelationships: – BibEntity: Dates: – D: 01 M: 10 Text: Oct2026 Type: published Y: 2026 Identifiers: – Type: issn-print Value: 03784754 Numbering: – Type: volume Value: 248 Titles: – TitleFull: Mathematics & Computers in Simulation Type: main |
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