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I am just wondering if there is any problem with the so-called "exact" Heston simulations? So far what I have seen are the good things about it, what are the disadvantages? Because if it is so perfect, why is everyone not using the "exact" simulation since it would reduce the discretization error?


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From this abstract: One paper by Broadie and Kaya (2006) stands out in that it proposes what the authors call “an exact simulation method” by which they mean that there it has no bias and therefore no additional time steps are required. In this paper we address the major drawback of their method: that it is only effectively applicable to derivative payoffs which depend only on observations of the underlying at very few points in time. – chrisaycock Mar 21 '13 at 12:57

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