Shu Tezuka
Mathematics of Computation
Recently, Paskov reported that the use of a certain pseudo-random number generator, ran1(), given in Numerical Recipes in C, First Edition makes Monte Carlo simulations for pricing financial deriva-tives converge to wrong values. In this paper, we trace Paskov's experiment, investigate the characteristics and the generation algorithm of the pseudo-random number generator in question, and explain why the wrong convergences occur. We then present a method for avoiding such wrong convergences. A variance reduction procedure is applied, to gether with a method for obtaining more precise values, and its correctness is examined. We also investigate whether statistical tests for pseudo-random numbers can detect the cause of wrong convergences.
Shu Tezuka
Mathematics of Computation
Shu Tezuka
ACM Transactions on Modeling and Computer Simulation (TOMACS)
Shu Tezuka, Takeshi Tokuyama
ACM Transactions on Modeling and Computer Simulation (TOMACS)
Shu Tezuka, Hiroki Murata, et al.
Future Generation Computer Systems