Popuri, Sai K.Raim, Andrew M.Neerchal, Nagaraj K.Gobbert, Matthias K.2018-09-202018-09-202017-11-24Sai K. Popuri, Andrew M. Raim, Nagaraj K. Neerchal & Matthias K. Gobbert (2018) Parallelizing computation of expected values in recombinant binomial trees, Journal of Statistical Computation and Simulation, 88:4, 657-674, DOI: 10.1080/00949655.2017.1402898https://doi.org/10.1080/00949655.2017.1402898http://hdl.handle.net/11603/11338This work was written as part of one of the author's official duties as an Employee of the United States Government and is therefore a work of the United States Government. In accordance with 17 U.S.C. 105, no copyright protection is available for such works under U.S. Law.Recombinant binomial trees are binary trees where each non-leaf node has two child nodes, but adjacent parents share a common child node. Such trees arise in option pricing in finance. For example, an option can be valued by evaluating the expected payoffs with respect to random paths in the tree. The cost to exactly compute expected values over random paths grows exponentially in the depth of the tree, rendering a serial computation of one branch at a time impractical. We propose a parallelization method that transforms the calculation of the expected value into an embarrassingly parallel problem by mapping the branches of the binomial tree to the processes in a multiprocessor computing environment. We also discuss a parallel Monte Carlo method and verify the convergence and the variance reduction behavior by simulation study. Performance results from R and Julia implementations are compared on a distributed computing cluster.18 pagesen-USThis item may be protected under Title 17 of the U.S. Copyright Law. It is made available by UMBC for non-commercial research and education. For permission to publish or reproduce, please contact the author.Public Domain Mark 1.0Binomial treeBernoulli pathsMonte Carlo estimationoption pricingUMBC High Performance Computing Facility (HPCF)Text