A weak MLMC scheme for Lévy-copula-driven SDEs with applications to the pricing of credit, equity and interest rate derivatives

This paper develops a novel weak multilevel Monte-Carlo (MLMC) approximation scheme for Lévy-driven Stochastic Differential Equations (SDEs). The scheme is based on the state space discretization (via a continuous-time Markov chain approximation) of the pure-jump component of the driving Lévy process and is particularly suited if the multidimensional driver is given by a Lévy copula. The multilevel version of the algorithm requires a new coupling of the approximate Lévy drivers in the consecutiv...