Chapter 2: Dynamic Monte Carlo

This chapter presents both existing and new algorithms for simulating paths of a random process.

Section 2.1 introduces the main issue of sampling from probability measures on a path space.

Section 2.2 focuses on continuous path diffusion processes: four methods are presented and illustrated using a comprehensive example on derivative pricing.

Section 2.3 details methods for simulating pure and mixedjump diffusions.

Section 2.4 sketches procedures that have been designed for special classes of continuous time processes.